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The Leading Premium

SAFE Working Paper No. 371

75 Pages Posted: 20 Nov 2015 Last revised: 12 Dec 2022

See all articles by Mariano (Max) Massimiliano Croce

Mariano (Max) Massimiliano Croce

Finance Department, Bocconi University; Centre for Economic Policy Research (CEPR)

Tatyana Marchuk

Nova School of Business & Economics; Centre for Economic Policy Research (CEPR)

Christian Schlag

Goethe University Frankfurt; Leibniz Institute for Financial Research SAFE

Multiple version iconThere are 3 versions of this paper

Date Written: December 12, 2022

Abstract

In this paper, we consider conditional measures of lead-lag relationships between aggregate growth and industry-level cash-flow growth in the US. Our results show that firms in leading industries pay an average annualized return 3.6\% higher than that of firms in lagging industries. Using both time series and cross sectional tests, we estimate an annual pure timing premium ranging from 1.2% to 1.7%. 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.

JEL Classification: G12, E32, E44

Suggested Citation

Croce, Mariano Massimiliano and Marchuk, Tatyana and Schlag, Christian, The Leading Premium (December 12, 2022). SAFE Working Paper No. 371, Available at SSRN: https://ssrn.com/abstract=2692892 or http://dx.doi.org/10.2139/ssrn.2692892

Mariano Massimiliano Croce (Contact Author)

Finance Department, Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

HOME PAGE: http://sites.google.com/view/mmcroce/home

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Tatyana Marchuk

Nova School of Business & Economics ( email )

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Christian Schlag

Goethe University Frankfurt ( email )

Faculty of Economics and Business
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, Hessen 60323
Germany

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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