We introduce forecasted unemployment as a state variable that forecasts future macroeconomic activity. Hence …, forecasted unemployment is expected to be priced in the crosssection of stock returns. Consistently, we quantify stock exposure … to forecasted unemployment and document the importance of unemployment beta in the pricing of individual stocks. Stocks …

We introduce forecasted unemployment as a state variable that forecasts future macroeconomic activity. Hence …, forecasted unemployment is expected to be priced in the cross-section of stock returns. Consistently, we quantify stock exposure … to forecasted unemployment and document the importance of unemployment beta in the pricing of individual stocks. Stocks …

We investigate both theoretically and empirically how unemployment level and its growth affect future stock returns. We … find that both a higher unemployment rate and higher growth of unemployment positively predict future stock market returns … reinforce each other making stock returns exceptionally high in periods of high unemployment and high unemployment growth. Our …