Finance and Accounting seminar - "Labor Market Networks, Fundamentals, and Stock Returns"

This paper proposes a measure of labor market connectivity and investigates the impact of productivity-shock-transmission on rm fundamentals and stock returns through labor market networks. We nd a signicantly positive predictive relations for a focal industry's growth rate of labor productivity, wage, employment, and prof- itability from its labor-connected-industries. A focal industry's stock return is posi- tively predicted by the past return of its labor-connected-industries, with an annualized return of up to 9% for long-short portfolios. The predictability is driven by positive spillover of productivity shocks across industries and concentrated in stocks with higher arbitrage costs and higher ownership of uninformed investors.