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How Important Are Foreign Ownership Linkages for International Stock Returns?

Author

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  • Bartram, Sohnke M.

    (Lancaster University)

  • Griffin, John

    (University of TX)

  • Ng, David

    (University of PA and Cornell University)

Abstract

A large previous literature has examined the relative importance of country and industry effects for international stock returns. We find that there is a third important driver, ownership. We develop a simple measure of international ownership linkages and show that ownership linkages are of similar importance to the traditional country and industry effects. International ownership linkages are not explained by the local or world market, country of capital origin, liquidity, investment style, foreign operations, the level of foreign ownership, or fund flows. We find evidence of the effect being driven by investor habitat and portfolio rebalancing. The specific ownership composition of a stock is an important facet of international equity returns--a finding which has important practical diversification implications.

Suggested Citation

  • Bartram, Sohnke M. & Griffin, John & Ng, David, 2010. "How Important Are Foreign Ownership Linkages for International Stock Returns?," Working Papers 10-21, University of Pennsylvania, Wharton School, Weiss Center.
    • Handle: RePEc:ecl:upafin:10-21
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    More about this item

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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