Supply chain links and predictability of returns

In this article I show that returns can be predicted across the supply chain. Information about supplier rms and their customers show signs of investors' inattention and can be used to generate abnormally high returns. Elaboration on this investors' inattention shows that the eect diminishes as the customer news diuses slowly into the supplier stock price. By measuring the underreaction of the supplier stock prices, this paper shows that supplier stocks respond to customer news for only 65% within the rst month. Furthermore, results of this paper suggest that negative news tends to diuse more slowly into stock prices than positive news. Last, this research shows there is a negative relation between expected volatility and market returns. Prove for a relation between expected volatility and investor's inattention cannot be found.