Publication Type
Journal Article
Version
submittedVersion
Publication Date
8-2022
Abstract
Firms in global markets often belong to business groups. We argue that this feature can have a profound influence on international asset pricing. In bad times, business groups may strategically reallocate risk across affiliated firms to protect core “central firms.” This strategic behavior induces co-movement among central firms, creating a new intertemporal risk factor. Based on a novel data set of worldwide ownership for 2002–2012, we find that central firms are better protected in bad times and that they earn relatively lower expected returns. Moreover, a centrality factor augments traditional models in explaining the cross section of international stock returns.
Keywords
International Asset Pricing, Business Groups, Centrality, Co-movement
Discipline
Finance | Finance and Financial Management
Research Areas
Finance
Publication
Journal of Financial Economics
Volume
145
Issue
2 Part B
First Page
339
Last Page
361
ISSN
0304-405X
Identifier
10.1016/j.jfineco.2021.09.002
Publisher
Elsevier
Citation
MASSA, Massimo; ZHANG, Hong; and ZHANG, Hong.
International asset pricing with strategic business groups. (2022). Journal of Financial Economics. 145, (2 Part B), 339-361.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/7055
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
External URL
https://doi.org/10.1016/j.jfineco.2021.09.002