Labor Market Information and Predictable Returns

23 Pages Posted: 28 Mar 2022 Last revised: 27 Apr 2022

See all articles by Jae Hyoung Kim

Jae Hyoung Kim

Swedish House of Finance; Stockholm School of Economics

Date Written: February 18, 2022

Abstract

This study documents simple trading strategies that predict stock returns using the sentiment information of labor market related news articles. I identify the average sentiment scores of labor market related news articles of each firm daily and use them to predict stock returns. Unlike the sentiment information from capital market and product market related news articles, those from labor market related articles appear to incorporate into stock prices slower. I find that the sentiment information of labor market related news articles appears to outperform the predictive effects on stock returns compared to those of product market related articles. Also, the predictive effects of the sentiment information in news articles outperform those in press releases. Ultimately, the findings shed light on the speed of sentiment information assimilation on stock prices.

Keywords: Return Predictability, Sentiment Analysis, Textual Analysis, Labor Markets, Market Efficiency

JEL Classification: C55, G11, G14, G41, J01

Suggested Citation

Kim, Jae Hyoung, Labor Market Information and Predictable Returns (February 18, 2022). Swedish House of Finance Research Paper No. 22-09, Available at SSRN: https://ssrn.com/abstract=4037876 or http://dx.doi.org/10.2139/ssrn.4037876

Jae Hyoung Kim (Contact Author)

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

Stockholm School of Economics ( email )

PO Box 6501
Stockholm, 11383
Sweden

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