Do Labor Flows Matter in the Stock Market?

58 Pages Posted: 28 Jan 2022 Last revised: 14 Sep 2023

See all articles by Jian Chen

Jian Chen

Xiamen University - School of Economics

Chunmian Ge

South China University of Technology

Jiaquan Yao

Jinan University - Management School

Guofu Zhou

Washington University in St. Louis - John M. Olin Business School

Date Written: September 13, 2023

Abstract

Using data on individual resumes of public firm employees, we propose a measure of monthly innovations in labor market flow, and find that the stock market rises as it increases. This predictability holds out-of-sample and cannot be explained by existing labor and macroeconomic predictors. In asset allocation, mean-variance investors can exploit the predictability to generate sizable economic profits. We find further that labor market flows contain information about disaster concerns and household consumption that is incorporated into the stock market with a delay. The underlying mechanism of predictability appears due to investor underreaction arising from limited attention.

Keywords: Labor flows, Hiring rate, Investor underreaction, Limited attention, Return predictability

JEL Classification: C22, C53, G11, G12, G17

Suggested Citation

Chen, Jian and Ge, Chunmian and Yao, Jiaquan and Zhou, Guofu, Do Labor Flows Matter in the Stock Market? (September 13, 2023). Available at SSRN: https://ssrn.com/abstract=4016154 or http://dx.doi.org/10.2139/ssrn.4016154

Jian Chen (Contact Author)

Xiamen University - School of Economics ( email )

422 Siming Nan Road
Xiamen, Fujian 361005
China

Chunmian Ge

South China University of Technology ( email )

School of Business Administration
South China University of Technology
Guangzhou, Guangdong 510640
China

HOME PAGE: http://sites.google.com/site/gechunmian/

Jiaquan Yao

Jinan University - Management School ( email )

No. 601, West Huangpu Road
Guangzhou, Guangdong 510632
China

HOME PAGE: http://www.jiaquanyao.com

Guofu Zhou

Washington University in St. Louis - John M. Olin Business School ( email )

Washington University
Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-6384 (Phone)
314-658-6359 (Fax)

HOME PAGE: http://apps.olin.wustl.edu/faculty/zhou/

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