We investigate how globalization is reflected in asset prices. We use shipping costs to measure firms’ exposure to globalization. Firms in low shipping cost industries carry a 7 percent risk premium, suggesting that their cash-flows co-vary negatively with investors’ marginal utility. We find that the premium emanates from the risk of displacement of least efficient firms triggered by import competition. These findings suggest that foreign productivity shocks are associated with times when consumption is dear for investors. We discuss conditions under which a standard model of trade with asset prices can rationalize this puzzle.
The globalization risk premium
Julien Sauvagnat
2019
Abstract
We investigate how globalization is reflected in asset prices. We use shipping costs to measure firms’ exposure to globalization. Firms in low shipping cost industries carry a 7 percent risk premium, suggesting that their cash-flows co-vary negatively with investors’ marginal utility. We find that the premium emanates from the risk of displacement of least efficient firms triggered by import competition. These findings suggest that foreign productivity shocks are associated with times when consumption is dear for investors. We discuss conditions under which a standard model of trade with asset prices can rationalize this puzzle.File | Dimensione | Formato | |
---|---|---|---|
TheGlobalizationRiskPremium_preview.pdf
non disponibili
Tipologia:
Documento in Pre-print (Pre-print document)
Licenza:
NON PUBBLICO - Accesso privato/ristretto
Dimensione
235.03 kB
Formato
Adobe PDF
|
235.03 kB | Adobe PDF | Visualizza/Apri |
Zimbra.pdf
non disponibili
Tipologia:
Allegato per valutazione Bocconi (Attachment for Bocconi evaluation)
Licenza:
NON PUBBLICO - Accesso privato/ristretto
Dimensione
102.86 kB
Formato
Adobe PDF
|
102.86 kB | Adobe PDF | Visualizza/Apri |
I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.