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The leading premium

Author

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  • Croce, Mariano M.
  • Marchuk, Tatyana
  • Schlag, Christian

Abstract

In this paper, we consider conditional measures of lead-lag relationships between aggregate growth and industry-level cash-flow growth in the US. Our results show that firms in leading industries pay an average annualized return 3.6% higher than that of firms in lagging industries. Using both time series and cross sectional tests, we estimate an annual pure timing premium ranging from 1.2% to 1.7%. 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

  • Croce, Mariano M. & Marchuk, Tatyana & Schlag, Christian, 2022. "The leading premium," SAFE Working Paper Series 371, Leibniz Institute for Financial Research SAFE.
    • Handle: RePEc:zbw:safewp:371
    DOI: 10.2139/ssrn.2692892
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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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