Abstract
This paper investigates the effect of one specific measure of the global demand for local stocks, U.S. investors’ net flows, on firm-level stock returns. I document that stocks with lower sensitivity to U.S. investors’ net flows (NFL) earn significantly higher returns. The negative association is not subsumed by standard characteristics associated with mispricing, price-pressures, difference of opinion, or firm-level foreign operations, and is relatively easy to exploit. Consistent with global flows amplifying the demand for local stocks, I present reliable evidence that the return to an NFL factor-mimicking portfolio is predictable and concentrated in periods that follow reduced uncertainty and sentiment.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
