Labor Hiring, Aggregate Dividends, and Return Predictability in the Time Series

Xiaoji Lin, Ding Luo, Andres Donangelo and Frederico Belo
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Ding Luo: University of Minnesota, Twin Cities
Frederico Belo: University of Minnesota and NBER

No 885, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: Using a standard production model, we demonstrate theoretically that (a) aggregate hiring rates negatively predict aggregate discount rates and dividends (b) large firms explain most of return predictability while small firms explain most of the dividend predictability and (c) the explanatory power of hiring rates is not explained by traditional cash-flow based measures of performance. We present evidence for the three predictions of our model, and demonstrate the significance of labor hiring to understand the dynamic nature of discount rates and cash flows.

Date: 2017
New Economics Papers: this item is included in nep-dge
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed017:885

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