The Leading Premium

Croce, Mariano (Max) Massimiliano; Marchuk, Tatyana; Schlag, Christian

doi:10.2139/ssrn.2692892

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The Leading Premium

61 Pages Posted: 20 Nov 2015 Last revised: 18 Oct 2021

See all articles by Mariano (Max) Massimiliano Croce

Mariano (Max) Massimiliano Croce

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

Christian Schlag

Goethe University Frankfurt; Leibniz Institute for Financial Research SAFE

There are 3 versions of this paper

Date Written: Nov 1, 2016

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.

JEL Classification: G12, E32, E44

Suggested Citation: Suggested Citation

Croce, Mariano Massimiliano and Marchuk, Tatyana and Schlag, Christian, The Leading Premium (Nov 1, 2016). Available at SSRN: https://ssrn.com/abstract=2692892 or http://dx.doi.org/10.2139/ssrn.2692892