Does Main Street Benefit from What Happens on Wall Street?

70 Pages Posted: 15 Dec 2020 Last revised: 1 Apr 2022

See all articles by Sean Flynn

Sean Flynn

Cornell SC Johnson College of Business

Andra C. Ghent

University of Utah - David Eccles School of Business

Date Written: March 31, 2022

Abstract

Yes. We show that aggregate stock returns predict aggregate US employment, despite the industrial composition of publicly traded firms differing markedly from that of all firms, and the representativeness of public firms declining over time. Using establishment-level data and cross-sectional variation in city and industry employment and returns, we also show that returns predict local and industry labor market outcomes. Our granular approach allows us to include time fixed effects such that the predictive power is not driven by omitted aggregate variables such as monetary policy expectations. Our results are consistent with an alignment of interests between shareholders and labor.

Keywords: Regional Employment, Industry Employment

JEL Classification: E24, E44, G14, G51, R12

Suggested Citation

Flynn, Sean and Ghent, Andra C., Does Main Street Benefit from What Happens on Wall Street? (March 31, 2022). Kenan Institute of Private Enterprise Research Paper No. 20-11, Available at SSRN: https://ssrn.com/abstract=3714998 or http://dx.doi.org/10.2139/ssrn.3714998

Sean Flynn

Cornell SC Johnson College of Business ( email )

Ithaca, NY 14850
United States

Andra C. Ghent (Contact Author)

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

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