AFA2019会议论文（26）：How Networks Impact Stock Returns

AFA2019会议论文（26）：How Networks Impact Stock Returns

金融经济学 3天前

1、Trade Networks and Asset Prices: Evidence from the Sovereign CDS Market

Huancheng Du, International Monetary Fund

Dong Lou, London School of Economics

Christopher Polk, London School of Economics

Jinfan Zhang, Chinese University of Hong Kong (Shenzhen)

Abstract

We exploit the information in sovereign credit default swap (SCDS) prices and the international trade network to reveal novel facts about the propagation of shocks in the global macroeconomy. We show that country fundamentals depend on both direct and indirect links in the trade network. Recognizing these links reveals novel variation in average return for the cross-section of country-level equity and credit, which we argue reflects an underreaction phenomenon occurring on a global scale. Specifically, a portfolio that goes long SCDS with the largest increase in export destinations’ credit risk and sells short SCDS with the largest decrease generates an average return of nearly 6% per year with a Sharpe ratio of 1.1. This transmission of value-relevant information across countries is even slower for indirect trade links. We exploit a natural experiment to confirm causality and a variance decomposition exercise to link a significant proportion of global volatility to the trade network.

原文链接：

https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=AFA2019&paper_id=1259

2、Production Networks and Stock Returns: The Role of Vertical Creative Destruction

Michael Gofman, University of Rochester

Gill Segal, University of North Carolina

Youchang Wu, University of Oregon

Abstract

We study creative destruction in production networks and its implication for firms’ risk profiles. Empirically, upstream firms with the longest distance to consumers earn an excess return of 105 basis points per month relative to downstream consumption producers. We explain this novel spread quantitatively using a general equilibrium model with multiple layers of production. The spread arises endogenously due to vertical creative destruction – innovations by direct and indirect suppliers devalue the installed capital of customer firms. Consistent with our model predictions, the spread is smaller among firms that belong to supply chains with lower competition, and is larger among firms whose assets-in-place account for a larger fraction of firm value. We document other new facts that can be reconciled via vertical creative destruction: (1) a diminished value premium among downstream firms; (2) a positive relation between the return of downstream firms and the market power of their direct and indirect suppliers. Overall, we explore a novel channel of creative destruction and demonstrate its significant impact on firms’ cost of capital.

原文链接：

https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=AFA2019&paper_id=228

3、Ownership Links and Return Predictability 

Angelica Gonzalez, University of Edinburgh

Jun Tu, Singapore Management University

Ran Zhang, University of Edinburgh

Abstract

We investigate the return predictability between subsidiaries and their parent firms by using an international sample of parent firms with complex ownership structures from 23 developed markets. We find that portfolio returns of the ownership-weighted subsidiaries can significantly predict the future returns of a parent firm in terms of statistics and economics. Specifically, a simple long/short portfolio strategy for a global sample sorted by lagged monthly returns of subsidiaries yields an FF5 abnormal return of 112 (value-weighted) or 128 (equal-weighted) basis points per month. We further find indirectly owned subsidiaries, foreign subsidiaries, different-industry subsidiaries, and minor ownership subsidiaries generate larger predictive power than directly owned subsidiaries, local subsidiaries, same-industry subsidiaries, and major ownership subsidiaries for future returns of parent firms. We find that ownership complexity, diversification discounts, subsidiaries’ relative size, limits to arbitrage, and investor limited attention may be mechanisms and reasons for the underreaction of parent firm returns for subsidiaries’ returns.

原文链接：

https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=AFA2019&paper_id=435

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