The leading premium

Mariano M. Croce, Tatyana Marchuk and Christian Schlag

No 371, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

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.

JEL-codes: E32 E44 G10 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:371

DOI: 10.2139/ssrn.2692892

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