Asset Management, Human Capital, and the Market for Risky Assets
State University of New York at Buffalo - Department of Economics; National Bureau of Economic Research (NBER); University of Chicago - University of Chicago Press; Institute for the Study of Labor (IZA)
University at Buffalo
State University of New York (SUNY), Buffalo - College of Arts & Sciences - Department of Economics
November, 18 2008
Journal of Human Capital, Vol. 2, No. 3, pp. 217-261, 2008
Conventional finance models treat risky-asset prices as "fully (information) revealing." Less work exists on how prices become information revealing. Our answer focuses on the micro foundations of information acquisition and the role of human capital in "asset management." We derive testable propositions on how education and the opportunity cost of asset management affect risky-asset demand, portfolio returns, asset-price volatility, and equity premiums. Using micro-level data, we find that education raises the portfolio share of risky assets and overall portfolio returns, whereas wage rates exert opposite effects. We find that the rate of return to education in generating nonwage income is nontrivial.
Number of Pages in PDF File: 45
Date posted: November 21, 2008
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