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Human-Capital-Adjusted Capital Asset Pricing Model

Jie Qin

Ritsumeikan University - Biwako-Kusatsu Campus

Japanese Economic Review, Vol. 53, pp. 182-198, 2002

While multi-beta models are found to be good approximations for the cross-sectional behaviour of stock prices, they fail to explain why that part of an asset's risk related to human capital is not captured by the asset's market beta. The empirical evidence also provides little justification for the linear relationship between expected returns and human capital betas. This paper addresses these issues with a theoretical examination of the effect of human capital on security prices. An intertemporal asset pricing model is derived in which expected returns are linearly and positively related to market betas and human capital betas.

Number of Pages in PDF File: 17

JEL Classification: G12, G13

Date posted: May 21, 2003  

Suggested Citation

Qin, Jie, Human-Capital-Adjusted Capital Asset Pricing Model. Japanese Economic Review, Vol. 53, pp. 182-198, 2002. Available at SSRN: https://ssrn.com/abstract=324706

Contact Information

Jie Qin (Contact Author)
Ritsumeikan University - Biwako-Kusatsu Campus
1-1-1 Noji-Higashi
Kusatsu, Shiga 525-8577
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