Do industries lead stock markets (2007)
| Venue: | Journal of Financial Economics |
| Citations: | 2 - 0 self |
BibTeX
@ARTICLE{Hong07doindustries,
author = {Harrison Hong and Walter Torous and Rossen Valkanov and We Jeremy and Stein We John and Rob Engle and Matthew Richardson and David Hirshleifer and Matthew Slaughter and Will Goetzmann},
title = {Do industries lead stock markets},
journal = {Journal of Financial Economics},
year = {2007},
pages = {367--396}
}
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Abstract
Abstract: We investigate whether the returns of industry portfolios are able to predict the movements of stock markets. In the U.S., we find that a significant number of industry returns, including retail, services, commercial real estate, metal and petroleum, can forecast the stock market by up to two months. Moreover, the propensity of an industry to predict the market is correlated with its propensity to forecast various indicators of economic activity such as industrial production growth. When we extend our analysis to the eight largest stock markets outside of the U.S., we find remarkably similar patterns. These findings suggest that stock markets react with a delay to information contained in industry returns about their fundamentals and that information diffuses only gradually across markets.
