The Leading Premium
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.
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Copy CitationM. Max Croce, Tatyana Marchuk, and Christian Schlag, "The Leading Premium," NBER Working Paper 25633 (2019), https://doi.org/10.3386/w25633.
Published Versions
Mariano M Croce & Tatyana Marchuk & Christian Schlag & Ralph Koijen, 2023. "The Leading Premium," The Review of Financial Studies, vol 36(8), pages 2997-3033.