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Global Engagement and Returns Volatility

Girma, S., Lancheros, S. & Riaño, A. ORCID: 0000-0002-8824-4055 (2016). Global Engagement and Returns Volatility. Oxford Bulletin of Economics and Statistics, 78(6), pp. 814-833. doi: 10.1111/obes.12150


This paper finds that a greater reliance on foreign market sales increases the volatility of firms’ stock returns, using high-frequency data for publicly listed Japanese manufacturing firms over the period 2000–10. The two margins of global engagement we consider, namely, exports and sales via foreign affiliates (horizontal foreign direct investment), have both a positive and economically significant effect on firm-level volatility. We find, however, that increasing the intensity of sales through foreign affiliates has a stronger effect on volatility than a similar change in export intensity. We also uncover evidence consistent with the notion that firms’ need to use external finance to cover the substantial costs involved in reaching foreign consumers can be an important channel through which firms’ participation in international markets increases their exposure to economic uncertainty.

Publication Type: Article
Additional Information: This is the peer reviewed version of the following article: Girma, S., Lancheros, S. and Riaño, A. (2016), Global Engagement and Returns Volatility. Oxf Bull Econ Stat, 78: 814-833., which has been published in final form at This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions.
Publisher Keywords: Volatility, Stock Returns, Exports, FDI, External Finance Dependence, Japan
Subjects: H Social Sciences > HB Economic Theory
J Political Science > JZ International relations
Departments: School of Policy & Global Affairs > Economics
SWORD Depositor:
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