On the lead-lag relationship in tourism and hospitality stocks

Despite the economic influence of the tourism and hospitality industry, the literature of hospitality financial management pays too little attention to the dynamics and interactions of tourism and hospitality stocks. This paper bridges this gap by examining the short-term dynamics and interactions between the stock returns of small and large firms in the US tourism and hospitality sector. The paper investigates the lead-lag relationships between large and small stocks in the US tourism and hospitality sector. To this end, it analyzes a sample of 301 stocks using cross-correlation function, impulse response function, and variance decomposition. The main findings prove the existence of short-term lead-lag relationships and dynamics between large and small firms in the US tourism and hospitality sector using equally- and value-weighted portfolios sorted by size. These results imply that returns of large firms are good predictors for returns of small firms. This finding is robust to the use of weekly data instead of monthly data, sorting on volume instead of size, and sorting the stocks into ten deciles instead of five quintiles.