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The Leading Premium

6 maggio 2019 ore 12:00 - 14:00

Aula 105, Sede di 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.