We investigate whether value-relevant foreign information only gradually dilutes into stock prices of multinational firms worldwide. Using an international sample of firms from 22 developed countries, we find that a portfolio strategy based on firms' foreign sales information yields future returns of more than 10% p.a. globally. The return spread due to foreign information is substantial across different geographical regions and cannot be explained by traditional risk factors, firm characteristics, and industry momentum. Our results are in line with limited attention of investors to foreign information being the main driver of this effect worldwide.

We investigate whether value-relevant foreign information only gradually dilutes into stock prices of multinational firms worldwide. Using an international sample of firms from 22 developed countries, we find that a portfolio strategy based on firms' foreign sales information yields future returns of more than 10% p.a. globally. The return spread due to foreign information is substantial across different geographical regions and cannot be explained by traditional risk factors, firm characteristics, and industry momentum. Our results are in line with limited attention of investors to foreign information being the main driver of this effect worldwide. AbstractWe investigate whether value-relevant foreign information only gradually dilutes into stock prices of multinational firms worldwide. Using an international sample of firms from 22 developed countries, we find that a portfolio strategy based on firms' foreign sales information yields future returns of more than 10% p.a. globally. The return spread due to foreign information is substantial across different geographical regions and cannot be explained by traditional risk factors, firm characteristics, and industry momentum. Our results are in line with limited attention of investors to foreign information being the main driver of this effect worldwide.

This paper re-examines empirical lead-lag relationships in stock portfolios sorted by size, analyst coverage and institutional ownership across seven major developed markets. We find that lead-lag relationships continue to exist in a majority of countries. A simple trading strategy that exploits the return predictability based on lead-lag relationships yields significant abnormal returns in several markets. However, the abnormal returns quickly decline when transaction costs are introduced and become insignificant for one-way transaction costs of more than 40 basis points. Thus, lead-lag relationships are probably not exploitable in practice and will continue to exist in the future.