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Alliances and Return Predictability

Published online by Cambridge University Press:  16 December 2016

Jie Cao,
Tarun Chordia and
Chen Lin
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Abstract

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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.

Information

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 51 , Issue 5 , October 2016, pp. 1689 - 1717
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2016 

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