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- Title
Industrial Electricity Usage and Stock Returns.
- Authors
Da, Zhi; Huang, Dayong; Yun, Hayong
- Abstract
The growth rate of industrial electricity usage predicts future stock returns up to 1 year with an R2 of 9%. High industrial electricity usage today predicts low stock returns in the future, consistent with a countercyclical risk premium. Industrial electricity usage tracks the output of the most cyclical sectors. Our findings bridge a gap between the asset pricing literature and the business cycle literature, which uses industrial electricity usage to gauge production and output in real time. Industrial electricity growth compares favorably with traditional financial variables, and it outperforms Cooper and Priestley’s output gap measure in real time.
- Subjects
ELECTRIC power consumption; STOCK prices; MATHEMATICAL models; STOCKS (Finance); RISK premiums; BUSINESS cycles
- Publication
Journal of Financial & Quantitative Analysis, 2017, Vol 52, Issue 1, p37
- ISSN
0022-1090
- Publication type
Article
- DOI
10.1017/S002210901600079X