Alliances and Return Predictability. (16th December 2016)

• Record Type: Journal Article
• Authors: Cao, Jie; Chordia, Tarun; Lin, Chen
• Is Part Of: Journal of financial and quantitative analysis. Volume 51:Number 5(2016)
• Page Start: 1689
• Page End: 1717
• Publication Date: 2016-12-16
• Subjects: Finance -- Periodicals; Investments -- Mathematics -- Periodicals; 332.05
• DOI: 10.1017/S0022109016000600
• Languages: English
• ISSNs: 0022-1090

Abstract

Abstract : Building on the growing literature on interfirm links and limited attention, we find evidence of return predictability across alliance partners. A long–short portfolio sorted on lagged returns of strategic alliance partners provides a return of 89 basis points per month that is robust to a number of specifications. Investor inattention and limits to arbitrage may be the source of the underreaction of a firm's returns to that of its partners.