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The Leading Premium

Author

Listed:
  • Tatyana Marchuk

    (Goethe University Frankfurt)

  • Christian Schlag

    (Goethe University)

  • Mariano Croce

    (University of North Carolina at Chapel H)

Abstract

In this paper, we compute conditional measures of lead-lag relationships between GDP growth and industry-level cash-flow growth in the US. Results show that firms in leading industries pay an average annualized return 4% higher than that of firms in lagging industries. The difference in the returns of leading and lagging firms is priced in the cross section of equity returns, even after we adjust for the Fama-French three-factor model. This finding can be rationalized in a model in which (a) agents price growth news shocks, and (b) leading industries provide valuable resolution of uncertainty about the growth prospects of lagging industries.

Suggested Citation

  • Tatyana Marchuk & Christian Schlag & Mariano Croce, 2017. "The Leading Premium," 2017 Meeting Papers 1251, Society for Economic Dynamics.
    • Handle: RePEc:red:sed017:1251
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    References listed on IDEAS

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    Cited by:

    1. Lorenzo Bretscher & Andrea Tamoni & Aytek Malkhozov, 2019. "News Shocks and Asset Prices," 2019 Meeting Papers 100, Society for Economic Dynamics.

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