Abstract

http://ssrn.com/abstract=1267462
 
 

References (46)



 
 

Citations (18)



 


 



Labor Hiring, Investment, and Stock Return Predictability in the Cross Section


Frederico Belo


University of Minnesota; National Bureau of Economic Research (NBER)

Xiaoji Lin


Ohio State University (OSU) - Fisher College of Business

Santiago Bazdresch


University of Minnesota - Finance Department

September 15, 2013

Fisher College of Business Working Paper No. 2012-03-17
Charles A. Dice Center Working Paper No. 2012-17

Abstract:     
We study the impact of labor market frictions on asset prices. In the cross section of U.S. firms, a 10 percentage points increase in the firm’s hiring rate is associated with a 1.5 percentage points decrease in the firm’s annual risk premium. We propose an investment-based model with stochastic labor adjustment costs to explain this finding. Firms with high hiring rates are expanding firms that incur high adjustment costs. If the economy experiences a shock that lowers adjustment costs, these firms benefit the most. The corresponding increase in firm value operates as a hedge against these shocks, explaining the lower risk premium of these firms in equilibrium.

Number of Pages in PDF File: 52

Keywords: Labor Hiring, Investment, q-Theory, Cross-Sectional Asset Pricing, Production-Based Asset Pricing

JEL Classification: E22, E23, E44, G12

working papers series


Download This Paper

Date posted: September 15, 2008 ; Last revised: February 10, 2014

Suggested Citation

Belo, Frederico and Lin, Xiaoji and Bazdresch, Santiago, Labor Hiring, Investment, and Stock Return Predictability in the Cross Section (September 15, 2013). Charles A. Dice Center Working Paper No. 2012-17. Available at SSRN: http://ssrn.com/abstract=1267462 or http://dx.doi.org/10.2139/ssrn.1267462

Contact Information

Frederico Belo (Contact Author)
University of Minnesota ( email )
19th Avenue South
Minneapolis, MN 55455
United States
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Xiaoji Lin
Ohio State University (OSU) - Fisher College of Business ( email )
2100 Neil Avenue
Columbus, OH 43210-1144
United States
Santiago Bazdresch
University of Minnesota - Finance Department ( email )
321 19th Avenue South
Room 3-122
Minneapolis, MN 55455
United States
Feedback to SSRN


Paper statistics
Abstract Views: 4,743
Downloads: 1,296
Download Rank: 7,366
References:  46
Citations:  18

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo2 in 0.469 seconds