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Foreign-Born Resident Networks and Stock Comovement: When Local Bias Meets Home (Country) Bias

Published online by Cambridge University Press:  29 December 2020

Yun Meng  and
Christos Pantzalis
Yun Meng
Affiliation:
Ball State University Miller College of [email protected]
Christos Pantzalis*
Affiliation:
University of South Florida Muma College of Business
*
[email protected] (corresponding author)
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Abstract

Foreign migration flows have important stock market consequences. Foreign-born resident networks within U.S. Metropolitan Statistical Areas (MSAs) are associated with excess return comovement between locally headquartered stocks and American Depositary Receipts (ADRs) from countries with ties to the MSA through the network of foreign-born residents. This comovement is hardly due to correlated fundamentals and at least partially driven by correlated trading within members of a common investor base consisting of foreign-born residents. Our evidence has implications for both investors and foreign multinational corporations (MNCs) seeking to reap benefits from cross-listings and is consistent with the notion that foreign-born residents exhibit both local bias and home (country) bias.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 57 , Issue 3 , May 2022 , pp. 1204 - 1235
Copyright
© The Author(s), 2020. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

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