Risk, Returns, and Multinational Production
to risk: following a negative shock, they are reluctant to exit the foreign market because they would forgo the option premium (sunk cost) that they paid to become multinationals. The theory provides a complementary explanation for the cross section of returns by exploiting the production side from an international point of view. We calibrate the model to match U.S. export and FDI dynamics, and use it to explain cross-sectional differences in earnings yields and returns.
Year of publication: |
2010
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Authors: | Garetto, Stefania ; Fillat, Jose Luis |
Institutions: | Society for Economic Dynamics - SED |
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