The Leading Premium

71 Pages Posted: 12 Mar 2019 Last revised: 17 Jul 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

BI Norwegian Business School

Christian Schlag

Goethe University Frankfurt; Leibniz Institute for Financial Research SAFE

Multiple version iconThere are 3 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

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

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

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

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
+49 69 798 33699 (Phone)

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