The cross-sectional return predictability of employment growth: a liquidity risk explanation
The cross-sectional return predictability of employment growth: a liquidity risk explanation
Employment growth (EG) is related to liquidity fundamentals of investment opportunities, firm health, and information environment and quality. This, in turn, implies that liquidity risk may play a role in explaining the relation between employment growth and stock returns. We find strong empirical evidence supporting the link between employment growth and liquidity risk. Stocks of high-EG firms are more liquid and exposed to lower liquidity risk than stocks of low-EG firms. After adjusting for liquidity risk, employment growth loses its power to predict returns.
Liu, Weimin
e81ff941-d869-4f9a-ad99-eaa0f9675480
Luo, Di
cc1b0fa7-f630-45dc-ab05-495f9023148f
Park, Seyoung
7edd7f6a-f916-47cb-ae99-07814518351a
Zhao, Huainan
c1914fa7-b5f5-454a-9ef0-a44114ecfe8b
Liu, Weimin
e81ff941-d869-4f9a-ad99-eaa0f9675480
Luo, Di
cc1b0fa7-f630-45dc-ab05-495f9023148f
Park, Seyoung
7edd7f6a-f916-47cb-ae99-07814518351a
Zhao, Huainan
c1914fa7-b5f5-454a-9ef0-a44114ecfe8b
Liu, Weimin, Luo, Di, Park, Seyoung and Zhao, Huainan
(2021)
The cross-sectional return predictability of employment growth: a liquidity risk explanation.
Financial Review.
(In Press)
Abstract
Employment growth (EG) is related to liquidity fundamentals of investment opportunities, firm health, and information environment and quality. This, in turn, implies that liquidity risk may play a role in explaining the relation between employment growth and stock returns. We find strong empirical evidence supporting the link between employment growth and liquidity risk. Stocks of high-EG firms are more liquid and exposed to lower liquidity risk than stocks of low-EG firms. After adjusting for liquidity risk, employment growth loses its power to predict returns.
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Accepted/In Press date: 14 July 2021
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Local EPrints ID: 450459
URI: http://eprints.soton.ac.uk/id/eprint/450459
ISSN: 0732-8516
PURE UUID: d85521f4-9827-4411-a3c2-951f183742c0
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Date deposited: 28 Jul 2021 16:32
Last modified: 13 Dec 2021 03:21
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Contributors
Author:
Weimin Liu
Author:
Seyoung Park
Author:
Huainan Zhao
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