Product Market Competition, Labor Mobility, and the Cross-Section of Stock Returns

Ahmed, Shamim; Bu, Ziwen; Ye, Xiaoxia

Abstract

This paper explores the impact of product market competition on the positive relation between labor mobility (LM) and future returns.We develop a production-based model and formalize the intuition that low exposure to systematic risk in a concentrated industry limits LM's amplifying effect on operating leverage. Therefore, the model predicts a stronger positive relation between LM and expected returns for firms in competitive industries. Consistent with the model's prediction, we empirically find that LM predicts returns only among firms in competitive industries. This evidence suggests that the intensity of competition in firms' product market potentially drives the positive LM-return relation.

Citation

Ahmed, S., Bu, Z., & Ye, X. (2023). Product Market Competition, Labor Mobility, and the Cross-Section of Stock Returns. Review of Asset Pricing Studies, 13(3), 440-480. https://doi.org/10.1093/rapstu/raad001

• Journal Article Type: Article
• Acceptance Date: Dec 17, 2023
• Online Publication Date: Jan 9, 2023
• Publication Date: Sep 1, 2023
• Deposit Date: Mar 19, 2025
• Publicly Available Date: Mar 20, 2025
• Journal: Review of Asset Pricing Studies
• Print ISSN: 2045-9920
• Electronic ISSN: 2045-9939
• Publisher: Oxford University Press
• Peer Reviewed: Peer Reviewed
• Volume: 13
• Issue: 3
• Pages: 440-480
• DOI: https://doi.org/10.1093/rapstu/raad001
• Public URL: https://nottingham-repository.worktribe.com/output/45437325
• Publisher URL: https://academic.oup.com/raps/article/13/3/440/6978206