Saved in:
| Main Author: | |
|---|---|
| Format: | Preprint |
| Published: |
2025
|
| Subjects: | |
| Online Access: | https://arxiv.org/abs/2504.07855 |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| _version_ | 1866908311780065280 |
|---|---|
| author | Jiao, Wei |
| author_facet | Jiao, Wei |
| contents | We introduce a new machine learning approach to detect value-relevant foreign information for both domestic and multinational companies. Candidate foreign signals include lagged returns of stock markets and individual stocks across 47 foreign markets. By training over 100,000 models, we capture stock-specific, time-varying relationships between foreign signals and U.S. stock returns. Foreign signals exhibit out-of-sample return predictability for a subset of U.S. stocks across domestic and multinational companies. Valuable foreign signals are not concentrated in those largest foreign markets nor foreign firms in the same industry as U.S. firms. Signal importance analysis reveals the price discovery of foreign information is significantly slower for information from emerging and low-media-coverage markets and among stocks with lower foreign institutional ownership but is accelerated during the COVID-19 crisis. Our study suggests that machine learning-based investment strategies leveraging foreign signals can emerge as important mechanisms to improve the market efficiency of foreign information. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2504_07855 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Foreign Signal Radar Jiao, Wei Pricing of Securities We introduce a new machine learning approach to detect value-relevant foreign information for both domestic and multinational companies. Candidate foreign signals include lagged returns of stock markets and individual stocks across 47 foreign markets. By training over 100,000 models, we capture stock-specific, time-varying relationships between foreign signals and U.S. stock returns. Foreign signals exhibit out-of-sample return predictability for a subset of U.S. stocks across domestic and multinational companies. Valuable foreign signals are not concentrated in those largest foreign markets nor foreign firms in the same industry as U.S. firms. Signal importance analysis reveals the price discovery of foreign information is significantly slower for information from emerging and low-media-coverage markets and among stocks with lower foreign institutional ownership but is accelerated during the COVID-19 crisis. Our study suggests that machine learning-based investment strategies leveraging foreign signals can emerge as important mechanisms to improve the market efficiency of foreign information. |
| title | Foreign Signal Radar |
| topic | Pricing of Securities |
| url | https://arxiv.org/abs/2504.07855 |