Trading on Talent: Human Capital and Firm Performance

Review of Finance, forthcoming

50 Pages Posted: 12 Aug 2017 Last revised: 27 Dec 2022

See all articles by Anastassia Fedyk

Anastassia Fedyk

University of California, Berkeley - Haas School of Business

James Hodson

AI for Good; Cognism; Jožef Stefan Institute

Date Written: October 15, 2022


How is technically-skilled human capital reflected in firm performance? We leverage a uniquely detailed employer-employee matched dataset to measure U.S. firms’ technical human capital in IT, Software Engineering, Mobile Networks, Data Analysis, and Web Development. All five technical skillsets are associated with higher firm valuations. However, they negatively forecast both financial and operational performance in the future. For example, a one-standard-deviation increase in employees with IT skills corresponds to 2.2% higher Tobin’s q but predictable future returns of −10 basis points per month. Our results are stronger in tighter labor markets, in firms with more cash, and during time periods when each technical skillset is especially popular. These patterns suggest that the market expects too much from popular technologies, leading to overvaluation. Overall, our results highlight how corporate over-investment can extend to intangible capital such as skilled employees.

Keywords: return predictability, asset prices, human capital, skilled labor, technology

JEL Classification: G11, G00

Suggested Citation

Fedyk, Anastassia and Hodson, James, Trading on Talent: Human Capital and Firm Performance (October 15, 2022). Review of Finance, forthcoming, Available at SSRN: or

Anastassia Fedyk

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

James Hodson (Contact Author)

AI for Good ( email )

800 Arlington Boulevard
El Cerrito, CA 94530
United States
9177449036 (Phone)
9177449036 (Fax)


Cognism ( email )

92 Albert Embankment
London, SE17TT
United Kingdom


Jožef Stefan Institute ( email )

Jamova cesta 39
Ljubljana, 1000


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