Arbeitspapier
Horizontal industry relationships and return predictability
It has been documented that vertical customer-supplier links between industries are the basis for strong cross-sectional stock return predictability (Menzly and Ozbas (2010)).We show that robust predictability also arises from horizontal links between industries, i.e., from the fact that industries are competitors or offer products, which are substitutes for each other. These horizontally linked industries exhibit positively correlated fundamentals. The signal derived from this type of connectedness is the basis for significant alpha in sorted portfolio strategies, and informed investors take the related information into account when they form their portfolios. We thus provide evidence of return predictability based on a new type of economic links between industries not captured in previous studies.
- Language
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Englisch
- Bibliographic citation
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Series: SAFE Working Paper ; No. 256
- Classification
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Wirtschaft
Asset Pricing; Trading Volume; Bond Interest Rates
Financial Markets and the Macroeconomy
Criteria for Decision-Making under Risk and Uncertainty
- Subject
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connected industries
information flow
return predictability
- Event
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Geistige Schöpfung
- (who)
-
Schlag, Christian
Zeng, Kailin
- Event
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Veröffentlichung
- (who)
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Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe
- (where)
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Frankfurt a. M.
- (when)
-
2019
- DOI
-
doi:10.2139/ssrn.3436006
- Handle
- URN
-
urn:nbn:de:hebis:30:3-507368
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Schlag, Christian
- Zeng, Kailin
- Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe
Time of origin
- 2019
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Directional predictability of daily stock returns
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