The human capital that matters: expected returns and high-income households

• Autores: Sean D. Campbell, Stefanos Delikouras, Danling Jiang, George M. Korniotis
• Localización: Review of Financial Studies, ISSN-e 1465-7368, Vol. 29, Nº. 9, 2016, págs. 2523-2563
• Idioma: inglés
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• Resumen

  • We propose a novel human capital model that decomposes aggregate income risk into high- and low-income risk. We find that high-income risk is priced, while low-income risk is insignificant. The high-income factor alone explains 77% of the cross-sectional variation in the twenty-five size and book-to-market portfolios, earns a risk premium of about 7% per year, and its pricing power extends to the full cross-section of individual stocks. It is also related to the value factor, suggesting that the value premium might be compensation for income risk. Overall, our evidence indicates that high-income risk is an important macroeconomic risk factor.