The Stock Market and Aggregate Employment

Chen, Long; Zhang, Lu

doi:10.2139/ssrn.1434269

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The Stock Market and Aggregate Employment

40 Pages Posted: 16 Jul 2009 Last revised: 28 Jul 2009

See all articles by Long Chen

Long Chen

Cheung Kong Graduate School of Business; Luohan Academy

Lu Zhang

Ohio State University - Fisher College of Business; National Bureau of Economic Research (NBER)

There are 2 versions of this paper

Date Written: August 2009

Abstract

We study the interactions between the stock market and the labor market. When aggregate risk premiums are time-varying, predictive variables for market excess returns should forecast long-horizon growth in the marginal benefit of hiring and thereby long-horizon aggregate employment growth. Consistent with this logic, we document that long-horizon payroll growth and change in unemployment rate are predictable with risk premium proxies. Lagged payroll growth and change in unemployment rate also forecast stock market excess returns.

Keywords: Time-varying risk premiums, payroll growth, unemployment rate, search and matching, time-to-build

JEL Classification: G31, G12, J23

Suggested Citation: Suggested Citation

Chen, Long and Chen, Long and Zhang, Lu, The Stock Market and Aggregate Employment (August 2009). Available at SSRN: https://ssrn.com/abstract=1434269 or http://dx.doi.org/10.2139/ssrn.1434269