ICEF/LFE Researhc Seminar
Speaker: Jack Favilukis (LSE)
On Monday, November 19 at 5.00 pm,International College of Economics and Finance and International Laboratory of Financial Economics held a Research Seminar in Finance.
Speaker: Jack Favilukis (LSE)
Theme: «Does Wage Rigidity Make Firms Riskier? Evidence From Long-Horizon Return Predictability»
Venue:Shabolovka st. 26, building 3, room 3118
Abstract: We explore the relationship between sticky wages and risk. Like operating leverage, sticky wages are a source of risk for the firm. Firms, industries, or times with especially high or rigid wages are especially risky. If wages are sticky then wages growth should negatively forecast future stock returns because falling wages are associated with even bigger falls in output, and increases in operating leverage. Indeed, we find this to be the case in aggregate data, and in industry data. Furthermore, we find that industries with higher wage rigidity have a more negative relationship between wages and returns.