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Labor Hiring, Aggregate Dividends, and Return Predictability in the Time Series

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  • Xiaoji Lin

    (Ohio State University)

  • Ding Luo

    (University of Minnesota, Twin Cities)

  • Andres Donangelo

    (University of Texas)

  • Frederico Belo

    (University of Minnesota and NBER)

Abstract

Using a standard production model, we demonstrate theoretically that (a) aggregate hiring rates negatively predict aggregate discount rates and dividends (b) large firms explain most of return predictability while small firms explain most of the dividend predictability and (c) the explanatory power of hiring rates is not explained by traditional cash-flow based measures of performance. We present evidence for the three predictions of our model, and demonstrate the significance of labor hiring to understand the dynamic nature of discount rates and cash flows.

Suggested Citation

  • Xiaoji Lin & Ding Luo & Andres Donangelo & Frederico Belo, 2017. "Labor Hiring, Aggregate Dividends, and Return Predictability in the Time Series," 2017 Meeting Papers 885, Society for Economic Dynamics.
    • Handle: RePEc:red:sed017:885
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    References listed on IDEAS

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