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- Each month, we sort 35 portfolios into quintiles based on their past 12-month industry-specific returns. Then, we record the industry-level employment growth for these industries for the following k months, calculated as the continuously compounded average employment growth over all industries within the quintile. The sample period is from January 1952 to April 2003. Panel A reports an unconditional analysis and Panel B conditions on months in which CSV is in the top 10% (taken over the full sample period). Below the average industry-level employment changes, we report the corresponding Newey-West (1987) adjusted t-ratios based on k − 1 lags. The final column WML reports the difference between the top quintile (past winners) and bottom quintile (past losers). ∗∗∗, ∗∗, and ∗ indicate significance at the 1%, 5% and 10% levels, respectively.
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- For Panel A, yt:t+k = unt+k −unt where unt is based on a log transformation of the unemployment rate: unt = log(UNt/(1 − UNt)). For Panel B, yt:t+k = rt:t+k, i.e., the continuously compounded k-month excess return on the market from month t to month t + k. CSV m t is the cross-sectional volatility of past m-month industry idiosyncratic returns. Panel A reports the regression coefficient estimate (β̂), the corresponding Newey-West (1987) adjusted (based on k − 1 lags) t-ratios and the in-sample R2s. In addition, Panel B reports Hodrick (1992) t-ratios and the out-of-sample R2. ∗∗∗, ∗∗, and ∗ indicate significance at the 1%, 5% and 10% levels, respectively.
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- Industries are defined at the two-digit SIC level prior to 2002, and at three-digit NAICS level afterwards.
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- Panel A reports the regression coefficient estimate, the corresponding Newey-West (1987) adjusted (based on k − 1 lags) t-ratios and the in-sample R2s. The final column reports the correlation between the log excess stock market returns and unemployment growth, where both are taken over the same k-month horizon. In addition, Panel B reports Hodrick (1992) t-ratios and the out-of-sample R2. ∗∗∗, ∗∗, and ∗ indicate significance at the 1%, 5% and 10% levels, respectively.
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- Panel C reports the regression coefficient estimate (β̂), the corresponding t-ratios of Hodrick (1992) and Newey-West (1987) with k − 1 lags, as well as the in-sample and out-of-sample R2s for two recommended specifications, in which the forecasting variables are CSV and TERM, or CSV and PYRL. ∗∗∗, ∗∗ and ∗ indicate significance at the 1%, 5% and 10% levels, respectively.
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- The sample is from 1991 to 2013.
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