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.
|Number of pages||24|
|Early online date||11 Aug 2021|
|Publication status||Published Online - 11 Aug 2021|
ASJC Scopus subject areas
- Economics and Econometrics