Human Capital and Stock Returns: Is the Value Premium an Approximation for Return on Human Capital?

Stockholm University, School of Business Working Paper

35 Pages Posted: 8 May 2001

See all articles by Bo Hansson

Bo Hansson

Organization for Economic Co-Operation and Development (OECD) - Directorate for Education (EDU)

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Date Written: Undated

Abstract

This study, using a direct measure of the wage growth rate within firms, examines the value premium in relation to human capital. The results suggest that the dispersion in wage growth in value and growth stocks explains a large portion of the differences in stock returns. It appears that value stocks are less exposed to shocks in rents to human capital. Differences in labor force characteristics among value and growth stocks also proved to be an important factor in determining both the impact of future changes in labor income growth rate and firm value. The present findings are understood to mean that the ability of investors to forecast the dispersion in wage growth in firms is limited.

Keywords: Book-to-market, human capital, wage growth

JEL Classification: G11, G12, J30

Suggested Citation

Hansson, Bo, Human Capital and Stock Returns: Is the Value Premium an Approximation for Return on Human Capital? (Undated). Stockholm University, School of Business Working Paper, Available at SSRN: https://ssrn.com/abstract=265363 or http://dx.doi.org/10.2139/ssrn.265363

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