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Bridge over ocean
1 March 1999 Financial Analysts Journal Volume 55, Issue 2

Pricing of Domestic versus Multinational Companies

  1. Thierry Lombard
  2. Jacques Roulet
  3. Bruno H. Solnik

World financial markets are becoming integrated. Hence, global factors rather than domestic factors should dominate the pricing of stocks. All the empirical studies published until the mid-1990s, however, reported that stock prices respond primarily to domestic factors. In other words, the pricing of a company's stock is driven predominantly by the primary location of its stock listing rather than by the nature and geographical breakdown of its activities. We challenge this vision of international market pricing. We have found that stock pricing, at least for non-U.S. companies, is strongly influenced by the extent of the company's nondomestic activities. This finding has implications for the organization of global equity research departments and for the structure of the investment process.

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