Inter-industry network structure and the cross-predictability of earnings and stock returns

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“…To find the answer, it is important to analyze the location of each industry on the inter-industry network and its impact on other industries. This is because industries are highly organized and their linkages have a large impact on the national economy as a whole [2].…”

“…External sectors such as households, government, and finance, along with various industries in IO tables, become nodes, and the flows of economic activity between these sectors constitute links. The IO tables have been mainly used to analyze the economic structure, but recently it has been used variously in the area of predictions as well as analysis of the ripple effect and the establishment of government's economic policies [2][4] [10]. Especially, as the network analysis skill has improved, there has been attempts to study the effect of the inter-industry network structure on the overall fluctuation of the economy or the dynamics of the economic shocks spreading to the network [2][4] [5][11] [12].…”

“…The IO tables have been mainly used to analyze the economic structure, but recently it has been used variously in the area of predictions as well as analysis of the ripple effect and the establishment of government's economic policies [2][4] [10]. Especially, as the network analysis skill has improved, there has been attempts to study the effect of the inter-industry network structure on the overall fluctuation of the economy or the dynamics of the economic shocks spreading to the network [2][4] [5][11] [12]. One of the important goals of these studies is to establish a specific strategy by understanding the diffusion dynamics of the economic shock, or to find industries that play an important role in the network [2][4] [8][11] [13].…”

“…Especially, as the network analysis skill has improved, there has been attempts to study the effect of the inter-industry network structure on the overall fluctuation of the economy or the dynamics of the economic shocks spreading to the network [2][4] [5][11] [12]. One of the important goals of these studies is to establish a specific strategy by understanding the diffusion dynamics of the economic shock, or to find industries that play an important role in the network [2][4] [8][11] [13]. For this purpose, many indicators from the inter-industry analysis and the network theory have been used to show the importance of each industry (node).…”

“…J. McNerney et al have defined nodes with large in-flow (that is, out-flow) as important nodes [4]. D. Aobdia et al used eigenvector centrality to find central industries in inter-industry networks [2], and reported that the accounting performance of the central industries is more closely related to macroeconomic indicators than noncentral industries is and better explains the performance of the surrounding industries. That is, economic shocks to central industries are more strongly propagating than shocks applied to other industries.…”