Abstract

http://ssrn.com/abstract=2155295
 


 



Labor-Force Heterogeneity and Asset Prices: The Importance of Skilled Labor


Frederico Belo


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

Xiaoji Lin


Ohio State University (OSU) - Fisher College of Business

Jun Li


University of Texas at Dallas

Xiaofei Zhao


University of Texas at Dallas - Naveen Jindal School of Management

July 2016

Charles A. Dice Center Working Paper No. 2012-25
Fisher College of Business Working Paper No. 2012-03-025

Abstract:     
We investigate the impact of labor-force heterogeneity on asset prices in a neoclassical model. The negative firms’ hiring rate-expected stock return relation identified in previous studies should be steeper in industries that rely relatively more on high skill workers because it is more costly to replace a high skill than a low skill worker. Empirically, a long low hiring rate firms and short high hiring rate firms portfolio earns an average annual return of 8.6% in high skill industries, and only 0.9% in low skill industries. Additional empirical tests provide support for the models economic mechanism.

Number of Pages in PDF File: 60

Keywords: Labor Heterogeneity, Labor Skill, Labor Hiring, Investment, Stock Return Predictability, Cross-Sectional Asset Pricing, q-theory, Adjustment cost shocks

JEL Classification: E22, E23, E44, G12


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Date posted: October 2, 2012 ; Last revised: July 20, 2016

Suggested Citation

Belo, Frederico and Lin, Xiaoji and Li, Jun and Zhao, Xiaofei, Labor-Force Heterogeneity and Asset Prices: The Importance of Skilled Labor (July 2016). Charles A. Dice Center Working Paper No. 2012-25; Fisher College of Business Working Paper No. 2012-03-025. Available at SSRN: http://ssrn.com/abstract=2155295 or http://dx.doi.org/10.2139/ssrn.2155295

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

Jun Li
University of Texas at Dallas ( email )
800 West Campbell Road, SM 31
Richardson, TX 75080
United States
972-883-4422 (Phone)
Xiaofei Zhao
University of Texas at Dallas - Naveen Jindal School of Management ( email )
800 West Campbell Road, SM 31
Richardson, TX 75080
United States
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