The cross-sectional return predictability of employment growth: A liquidity risk explanation

Weimin Liu; Di Luo; Seyoung Park; Huainan Zhao

doi:10.1111/fire.12279

The cross-sectional return predictability of employment growth: A liquidity risk explanation

Weimin Liu, Di Luo, Seyoung Park, Huainan Zhao

Research output: Journal Publication › Review article › peer-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 language	English
Pages (from-to)	155-178
Number of pages	24
Journal	Financial Review
Volume	57
Issue number	1
Early online date	11 Aug 2021
DOIs	https://doi.org/10.1111/fire.12279
Publication status	Published Online - 11 Aug 2021
Externally published	Yes

ASJC Scopus subject areas

Finance
Economics and Econometrics

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1111/fire.12279

Cite this

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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.",

author = "Weimin Liu and Di Luo and Seyoung Park and Huainan Zhao",

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T2 - A liquidity risk explanation

AU - Liu, Weimin

AU - Luo, Di

AU - Park, Seyoung

AU - Zhao, Huainan

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Y1 - 2021/8/11

N2 - 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.

AB - 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.

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M3 - Review article

AN - SCOPUS:85112214197

SN - 0732-8516

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SP - 155

EP - 178

JO - Financial Review

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The cross-sectional return predictability of employment growth: A liquidity risk explanation

Abstract

ASJC Scopus subject areas

UN SDGs

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