The Cross-sectional Return Predictability of Employment Growth: A Liquidity Risk Explanation

Weimin Liu, Di Luo (Lead / Corresponding author), Seyoung Park, Huainan Zhao

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

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 EG and stock returns. We find strong empirical evidence supporting the link between EG 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, EG loses its power to predict returns.
Original languageEnglish
Pages (from-to)155-178
Number of pages24
JournalFinancial Review
Volume57
Issue number1
Early online date11 Aug 2021
DOIs
Publication statusPublished - Feb 2022

Keywords

  • employment growth premium
  • labor hiring
  • liquidity risk

Fingerprint

Dive into the research topics of 'The Cross-sectional Return Predictability of Employment Growth: A Liquidity Risk Explanation'. Together they form a unique fingerprint.

Cite this