The Propagation of Labor Market Information through Supply Chain Networks

Various studies have discussed the information propagation between customers and suppliers to maximize the performance of the entire supply chain. The authors focus on the propagation of job posting information, which is an important element of human capital strategy and is continuously updated. The authors then propose customer labor momentum based on the assumption that the job posting growth of customer firms will affect the performance and stock price of supplier firms through the job posting growth of supplier firms. An empirical analysis of the US market using stocks adopted from MSCI USA confirms that the customer labor momentum yields a 2.8% annual return and a 0.68 Sharpe ratio based on a long-short analysis. This strategy is more effective than the standard growth factors and customer price momentum in previous studies. This study also has an important contribution showing that new sources of excess returns can be discovered by combining alternative data, which investors cannot observe enough.