Sanctions Supply Chain Passthrough
In plain terms
When a country a company sources inputs from gets sanctioned, the supply-chain disruption tends to weigh on the downstream company. The academic basis (Carvalho et al 2021) shows this kind of supplier shock lowers firms' sales growth; the specific stock-holding window here is our own modeled choice, not a finding from the paper.
How it works
Carvalho-Nirei-Saito-Tahbaz-Salehi 2021 document that supply-chain disruptions propagate through firm-to-firm production networks: firms whose suppliers are disrupted suffer significant SALES-GROWTH declines over the year following the shock (3.6pp for direct disaster-hit suppliers). Internal generalization: a country a firm sources inputs from getting OFAC-sanctioned is treated as an analogous supplier-side disruption, motivating a downstream SHORT. The equity holding window and any magnitude are an internal heuristic, NOT findings of the paper (which reports no equity-return, no 1-3 month lag, no amplification factor, and no Sharpe/alpha).
Data dependencies
- Daily prices
Adjusted-close OHLCV for every US-listed ticker; primary price feed.
- Ofac sdn
A data feed this strategy reads, refreshed on its normal schedule.
- Ofac corporate exposure
A data feed this strategy reads, refreshed on its normal schedule.
Expected edge
- Tested over
- T+1 to T+90d
Carvalho et al 2021 QJE network passthrough; internal target 150-400 bps over 30-90d.
Example tickers where this is likely to fire
Illustrative only, the signal fires based on the live data, not a fixed list.
Related families
OFAC adds new country/entity to sanctions list → US firms with disclosed business there underperform 1-3 weeks.
When OFAC sanctions hit multiple countries that a US-listed company discloses exposure to within a month, we expect the stock to keep drifting down for weeks.
When global news tone, conflict fatalities, port throughput drops, and shipping prices all flash supply-chain stress at the same time, we short the cyclical industrials that depend on global trade for two to three weeks.
Explore Sanctions Supply Chain Passthrough on alphactor.ai
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