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- Economic Links from Loans and Cross-stock Return Predictability (Solo Paper)
Back to topThis paper provides novel evidence that equity investors react to firm-specific shocks transmitted through banks with a delay. Using the cross-section of common-bank-lender (CBL) peer returns (CBLRet), I construct a long-short portfolio that generates annual risk-adjusted returns of 7%–8% from 1994 to 2024, which can not be subsumed by shared-analyst momentum and bond-rating-comovement momentum. This cross-stock predictability stems from limited attention on information from loan market, which underscores the sluggish stock price reaction.