Macroeconomic News in the Cross Section of Asset Growth

33 Pages Posted: 17 Jan 2017 Last revised: 12 Nov 2020

See all articles by Artur Hugon

Artur Hugon

Arizona State University (ASU)

Matthew R. Lyle

Northwestern University - Kellogg School of Management

Clark G. Shu

University of Toronto - Rotman School of Management

Date Written: November 11, 2020

Abstract

Firms make forward-looking decisions. We provide evidence that managers’ investment decisions contain news about future aggregate conditions. This information is best extracted by dimension-reduction techniques. We appeal to news-driven business cycle theory to explain our result, suggesting that these investment decisions contain information about expected fundamentals. This theory also helps us to understand why accounting-based measures of investment reveal the news, while market-based measures do not.

Keywords: Gross Domestic Product, Out-Of-Sample, News-Driven Business Cycle, Partial Least Squares, Firm Investment

JEL Classification: M41, G17, E17

Suggested Citation

Hugon, Artur and Lyle, Matthew R. and Shu, Clark Guanzhong, Macroeconomic News in the Cross Section of Asset Growth (November 11, 2020). Available at SSRN: https://ssrn.com/abstract=2899862 or http://dx.doi.org/10.2139/ssrn.2899862

Artur Hugon (Contact Author)

Arizona State University (ASU) ( email )

Farmer Building 440G PO Box 872011
Tempe, AZ 85287
United States

Matthew R. Lyle

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Clark Guanzhong Shu

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
293
Abstract Views
1,945
rank
133,621
PlumX Metrics