Do industries lead stock markets? A reexamination

Yiuman Tse

Journal of Empirical Finance, 2015, vol. 34, issue C, 195-203

Abstract: Hong et al. (2007) report that a number of U.S. industry returns can forecast the stock market using monthly data. Reexamining their results with an extended period, 1946–2013, and data, 48 industries, I find that only one to seven industries have significant predictive ability for the stock market, depending on the significance level (10% or 5%) and the model specifications used. However, I find some evidence of the opposite predictive direction from the stock market to industries. The stock market also performs better than industries in predicting economic growth. Using similar data, 34 industries, and period, 1946–2002, as Hong et al., I find that the results are less significant after data revisions. My overall results are consistent with the efficient market hypothesis.

Keywords: Asset pricing; Financial markets and macroeconomy; Information and market efficiency (search for similar items in EconPapers)
JEL-codes: E44 G12 G14 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:34:y:2015:i:c:p:195-203

DOI: 10.1016/j.jempfin.2015.10.003

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