The Added Bonus of Foreign Investments: Global Mutual Funds and Multinational Firm Returns

This paper uses global mutual funds to study foreign information dissemination across countries into multinationals’ stock prices. To invest internationally, these funds collect information from foreign countries where they invest. Such foreign information helps funds invest in U.S. multinationals operating in those same foreign countries. Global funds overweight and outperform on the selected multinationals’ stocks. They exploit market‐level, industry‐level, and firm‐specific foreign information. The trading activities of these funds accelerate the incorporation of foreign information into the selected multinationals’ prices. Our findings suggest that global mutual funds are important mechanisms for information dissemination into multinationals’ asset prices in global markets.