The Leading Premium

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

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The Leading Premium

NBER Working Paper No. w25633

71 Pages Posted: 12 Mar 2019 Last revised: 24 Jul 2023

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 2 versions of this paper

Date Written: March 2019

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.

Suggested Citation: Suggested Citation

Croce, Mariano Massimiliano and Marchuk, Tatyana and Schlag, Christian, The Leading Premium (March 2019). NBER Working Paper No. w25633, Available at SSRN: https://ssrn.com/abstract=3350403