Future labor income growth and the cross-section of equity returns
This paper examines the equilibrium relation between future labor income growth and expected asset returns; it proposes revisions in the expectation of future labor income growth as a macroeconomic state variable and suggests a three-factor model, including a factor related to this variable, along w...
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| Veröffentlicht in: | Journal of banking & finance 2011, Vol.35 (1), p.67-81 |
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| container_title | Journal of banking & finance |
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| creator | Kim, Dongcheol Kim, Tong Suk Min, Byoung-Kyu |
| description | This paper examines the equilibrium relation between future labor income growth and expected asset returns; it proposes revisions in the expectation of future labor income growth as a macroeconomic state variable and suggests a three-factor model, including a factor related to this variable, along with the consumption growth factor and the market factor. The proposed future labor income growth factor is positively associated with the Fama–French factors and subsumes their explanatory power in explaining the cross-section of stock returns. These results provide a possible economic explanation for the roles of the Fama–French factors: they are compensation for higher exposure to the risk related to changes in the value of human capital. This paper also compares the performance of the proposed three-factor model with other competing models and finds that the proposed model specification better captures cross-sectional variation in average returns than any of the competing asset pricing models considered. |
| doi_str_mv | 10.1016/j.jbankfin.2010.07.014 |
| format | Article |
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| identifier | ISSN: 0378-4266 |
| ispartof | Journal of banking & finance, 2011, Vol.35 (1), p.67-81 |
| issn | 0378-4266 1872-6372 |
| language | eng |
| recordid | cdi_proquest_miscellaneous_839140305 |
| source | RePEc; Elsevier ScienceDirect Journals Complete |
| subjects | Assets Capital returns Cross-sectional analysis Economic equilibrium Economic models Economic tracking portfolio Equity Fama–French factors Future labor income growth Future labor income growth Fama-French factors Economic tracking portfolio Intertemporal CAPM Growth factors Human capital Income Intertemporal CAPM Labor economics Labour market Macroeconomics Rates of return Stock returns Studies |
| title | Future labor income growth and the cross-section of equity returns |
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