Journal of Financial and Quantitative Analysis Vol. 58 No. 8 2023
Idiosyncrasy as a Leading Indicator
open access
Abstract
Disequilibrating macro shocks affect different firms’ prospects differently, increasing idiosyncratic variation in forward-looking stock returns before affecting economic growth. Consistent with most such shocks from 1947 to 2020 enhancing productivity, increased idiosyncratic stock return variation forecasts next-quarter real GDP growth, industrial production growth, and consumption growth both in-sample and out-of-sample. These effects persist after controlling for other leading economic indicators.
- DOI
- 10.1017/s0022109022001417
- Volume
- 58
- Issue
- 8
- Pages
- 3547-3576
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref