Asset Management, Human Capital, and the Market for Risky Assets

Journal of Human Capital, Vol. 2, No. 3, pp. 217-261, 2008

45 Pages Posted: 21 Nov 2008  

Isaac Ehrlich

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)

William Hamlen

University at Buffalo

Yong Yin

State University of New York (SUNY), Buffalo - College of Arts & Sciences - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: November, 18 2008

Abstract

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.

Suggested Citation

Ehrlich, Isaac and Hamlen, William and Yin, Yong, Asset Management, Human Capital, and the Market for Risky Assets (November, 18 2008). Journal of Human Capital, Vol. 2, No. 3, pp. 217-261, 2008. Available at SSRN: https://ssrn.com/abstract=1303635

Isaac Ehrlich (Contact Author)

State University of New York at Buffalo - Department of Economics ( email )

415 Fronczak Hall
Buffalo, NY 14260
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716-645 2121 (Phone)
716-645 2127 (Fax)

HOME PAGE: http://economics.buffalo.edu/people/ehrlich/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
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University of Chicago - University of Chicago Press ( email )

1427 E. 60th Street
Chicago, IL 60637
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Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

William A. Hamlen

University at Buffalo ( email )

12 Capen Hall
Buffalo, NY 14222
United States

Yong Yin

State University of New York (SUNY), Buffalo - College of Arts & Sciences - Department of Economics ( email )

Buffalo, NY 14260
United States

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