“The Leading Premium” by Max Croce, accepted at Review of Financial Studies
![](/sites/default/files/styles/detail_full_xxl/public/media/images/croce%20news.jpg?itok=-SqAjyMx)
The Leading Premium
Max Croce, Tatyana Marchuk, and Christian Schlag
Accepted at Review of Financial Studies
Abstract
In this paper, we consider conditional measures of lead-lag relationships between aggregate growth and industry-level cash-flow growth in the US. Our results show that firms in leading industries pay an average annualized return 3.6\% higher than that of firms in lagging industries. Using both time series and cross sectional tests, we estimate an annual pure timing premium ranging from 1.2% to 1.7%. 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.