Idiosyncrasy as a Leading Indicator

Randall Morck, Bernard Yeung and Lu Y. Zhang

No 30071, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Disequilibrating macro shocks affect different firms' prospects differently, increasing idiosyncratic variation in forward-looking stock returns before affecting economic growth. Consistent with most such shocks from 1947 to 2020 enhancing productivity, increased idiosyncratic stock return variation forecasts next-quarter real GDP growth, industrial production growth, and consumption growth both in-sample and out-of-sample. These effects persist after controlling for other leading economic indicators.

JEL-codes: E32 E44 G01 G14 G41 (search for similar items in EconPapers)
Date: 2022-05
New Economics Papers: this item is included in nep-fdg, nep-his and nep-mac
Note: CF
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Published as Randall Morck & Bernard Yeung & Lu Y. Zhang, 2023. "Idiosyncrasy as a Leading Indicator," Journal of Financial and Quantitative Analysis, vol 58(8), pages 3547-3576.

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