The Leading Premium

Lun, 05/06/2019 - 12:00 / 14:00

105, Viale Romania, 32

Speaker: Massimiliano Croce , Bocconi

Title: The Leading Premium 

Abstract:  In this paper, we compute conditional measures of lead-lag relationships between GDP growth and industry-level cash-flow growth in the US. Our results show that firms in leading industries pay an average annualized return 4\% higher than that of firms in lagging industries. Using both time series and cross sectional tests, we estimate an annual timing premium ranging from 1.5% to 2%. 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.

[WP version]

 

With T. Marchuk and C. Schlag.