Abstract

This study aims to explore relationships between return linkages on international supply chain, idiosyncratic volatility and abnormal returns in local markets. Empirically, focusing on the seven top U.S. high-technology firms and local market of their Taiwanese suppliers, we find significant daily return spillovers from U.S. stocks to the suppliers, electronic industry indices, market index, and non-electronic index in Taiwan, possibly resulting from fundamentals connections or investor sentiments diffusion. Furthermore, stocks strongly sensitive to the U.S. stocks, have high idiosyncratic volatility and a return premium. Moreover, we provide an external sensitivity factor for asset pricing in Taiwan.

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