TY  - UNPD
A1  - Schlag, Christian
A1  - Zeng, Kailin
T1  - Horizontal industry relationships and return predictability
T2  - SAFE working paper series ; No. 256
N2  - It has been documented that vertical customer-supplier links between industries are the basis for strong cross-sectional stock return predictability (Menzly and Ozbas (2010)). We show that robust predictability also arises from horizontal links between industries, i.e., from the fact that industries are competitors or offer products, which are substitutes for each other. These horizontally linked industries exhibit positively correlated fundamentals. The signal derived from this type of connectedness is the basis for significant alpha in sorted portfolio strategies, and informed investors take the related information into account when they form their portfolios. We thus provide evidence of return predictability based on a new type of economic links between industries not captured in previous studies.
T3  - SAFE working paper - 256 
KW  - connected industries
KW  - information flow
KW  - return predictability
Y1  - 2019
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/50736
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-507368
UR  - https://ssrn.com/abstract=3436006
IS  - This version: August 9, 2019
PB  - SAFE
CY  - Frankfurt am Main
ER  -