International Asset Pricing with Strategic Business Groups

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

View graph of relations

Author(s)

Related Research Unit(s)

Detail(s)

Original languageEnglish
Pages (from-to)339-361
Number of pages23
Journal / PublicationJournal of Financial Economics
Volume145
Issue number2, Part B
Online published8 Sep 2021
Publication statusPublished - Aug 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 dataset 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.

Research Area(s)

  • International asset pricing, Business groups, Centrality, Co-movement

Bibliographic Note

Information for this record is supplemented by the author(s) concerned.

Citation Format(s)

International Asset Pricing with Strategic Business Groups. / Massa, Massimo; O’Donovan, James; Zhang, Hong.

In: Journal of Financial Economics, Vol. 145, No. 2, Part B, 08.2022, p. 339-361.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review