Human Capital Migration Networks and Stock Returns

Posted: 7 Jul 2020

See all articles by Yuanyang Liu

Yuanyang Liu

University of Tennessee, Knoxville

Eric McKee

University of Iowa

Gautam Pant

University of Iowa - Department of Business Analytics

Shagun Pant

University of Iowa - Department of Finance

Date Written: June 10, 2020

Abstract

We find that inter-firm human capital migration network centrality (HCMNC) is a strong positive predictor of future stock returns after controlling for firm characteristics and risk. We construct the human capital migration network using publicly available data from LinkedIn. A long-short value-weighted portfolio of firms ranked on HCMNC earned an annualized four-factor alpha of 5.5%. We find stronger return predictive power of HCMNC for firms with lower investor attention and higher valuation uncertainty. HCMNC is also associated with higher future operating performance, higher future profitability, and positive future earnings announcement surprises. The evidence is consistent with the market underreacting to HCMNC.

Suggested Citation

Liu, Yuanyang and McKee, Eric and Pant, Gautam and Pant, Shagun, Human Capital Migration Networks and Stock Returns (June 10, 2020). Available at SSRN: https://ssrn.com/abstract=3624342

Yuanyang Liu

University of Tennessee, Knoxville ( email )

Department of Business Analytics and Statistics
Knoxville, TN 37916
United States

HOME PAGE: http://https://sites.google.com/site/yuanyangliuhome

Eric McKee

University of Iowa ( email )

341 Schaeffer Hall
Iowa City, IA 52242-1097
United States

Gautam Pant

University of Iowa - Department of Business Analytics ( email )

IA
United States

Shagun Pant (Contact Author)

University of Iowa - Department of Finance ( email )

Iowa City, IA 52242-1000
United States

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