The Globalization Risk Premium

Jean Noël Barrot, Erik Loualiche, Julien Sauvagnat

Research output: Contribution to journalArticlepeer-review

2 Scopus citations


In this paper, we investigate how globalization is reflected in asset prices. We use shipping costs to measure firms' exposure to globalization. Firms in low shipping cost industries carry a 7% risk premium, suggesting that their cash flows covary negatively with investors' marginal utility. We find that the premium emanates from the risk of displacement of least efficient firms triggered by import competition. These findings suggest that foreign productivity shocks are associated with times when consumption is dear for investors. We discuss conditions under which a standard model of trade with asset prices can rationalize this puzzle.

Original languageEnglish (US)
Pages (from-to)2391-2439
Number of pages49
JournalJournal of Finance
Issue number5
StatePublished - Oct 1 2019

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© 2019 the American Finance Association


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