From Local to Global: Offshoring and Asset Prices

Industries differ in the extent to which they can offshore their production. I document that industries with low offshoring potential carry a sizeable risk premium compared with industries with high offshoring potential, suggesting that the possibility to offshore affects industry risk. A two-country dynamic trade model in which offshoring allows firms to secure market share against foreign competitors can rationalize the empirical findings. This paper was accepted by Gustavo Manso, finance. Supplemental Material: The online appendix and data files available at https://doi.org/10.1287/mnsc.2022.4393 .