Download or read book Labor Based Asset Pricing written by Yukun Liu and published by . This book was released on 2019 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: I establish empirically and theoretically that expectations of returns and cash flows are linked to firms' labor search decisions. Using a dataset that covers the near-universe of online job vacancy postings, I show that vacancy rates negatively predict stock returns and positively predict cash flows in the cross-section of firms and industries. The predictive power of vacancy postings is strengthened for firms facing less favorable labor-market conditions. Incorporating the supply and demand information of the aggregate labor market, I construct a new measure of employment value that strongly predicts aggregate stock and bond market returns, even in the presence of other known predictors. A production-side asset pricing model that combines heterogeneous production decisions with varying firm labor-market conditions generates these empirical findings.
Download or read book Asset Pricing with Production and Labor written by Qiang Dai and published by . This book was released on 2001 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper proposes a novel asset pricing model featuring dynamic interactions between production firms' aggregate financial performance and their aggregate labor expense. The model represents a significant extension of the standard asset pricing framework with production but without labor. Asset pricing implications are derived at a level of generality comparable to Merton, Breeden, and Cox-Ingersoll-Ross. At the aggregate level, the model leads to a two-factor ICAPM with financial- and labor-based betas that can not, in general, be reduced to Breeden's CCAPM.
Download or read book A Labor Capital Asset Pricing Model written by Lars-Alexander Kuehn and published by . This book was released on 2017 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show that labor search frictions are an important determinant of the cross-section of equity returns. Empirically, we find that firms with low loadings on labor market tightness outperform firms with high loadings by 6% annually. We propose a partial equilibrium labor market model in which heterogeneous firms make dynamic employment decisions under labor search frictions. In the model, loadings on labor market tightness proxy for priced time variation in the efficiency of the aggregate matching technology. Firms with low loadings are more exposed to adverse matching efficiency shocks and require higher expected stock returns.
Download or read book An Equilibrium Asset Pricing Model with Labor Market Search written by and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Essay on Labor technology Substitution and Asset Pricing written by Miao Zhang (Ph. D.) and published by . This book was released on 2016 with total page 244 pages. Available in PDF, EPUB and Kindle. Book excerpt: My dissertation aims at understanding how firms' adoption of labor-saving production technologies affects their investment and employment decisions; and, ultimately, their stock returns. Chapter 1 theoretically studies a firm's decision to replace its routine-task labor with machines over the business cycle, and explores the asset pricing implications of this decision. The model extends the classical investment-based asset pricing models in which a firm's investment decisions are modeled as exercising real options. I extend the set of firm's real options to include both growth options, which increase the firm's output, and technology switching options, which increase the firm's efficiency, and focus on the latter options. A key assumption in my model is that switching from using routine-task labor to using machines interrupts firm production. Hence, the firm optimally chooses to make this switch when its profitability is low in order to minimize opportunity cost. As a result, if the economy experiences a negative shock, firms with routine-task labor can improve their value through exercising these switching options, making their value less sensitive to aggregate shocks. In the cross-section, firms with a higher share of routine-task labor should have lower expected rates of return for their stocks. Chapter 2 constructs an empirical measure of firms' share of routine-task labor, namely, RShare, and presents tests of the model's predictions on the investment, employment, and asset prices of firms with high and low RShares. I classify occupations into routine- and non-routine-task labor, following the labor economics literature, and I use the establishment-level occupational data from the Bureau of Labor Statistics to construct RShare at the firm level. Consistent with my model's predictions, I find that within an industry, firms with a higher share of routine-task labor (i) invest more in machines and reduce disproportionately more of their routine-task labor during economic downturns, and (ii) have lower equity betas and returns.
Download or read book Asset Pricing Habit Memory and the Labor Market written by Ivan Jaccard and published by . This book was released on 2010 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: The main contribution of this study is to develop a dynamic general equilibrium model linking financial markets to the real economy. In search of a unified framework, this study finds that a model with internal habit memory is able to generate asset pricing and business cycle predictions that are strongly supported by the data. In comparison to solutions present in the literature, the equity premium puzzle can be resolved in a model also able to explain the dynamics of hours worked and real wages. In addition, the proposed mechanism avoids the generation of excessive risk-free rate variations and amplifies the effects of technology shocks.
Download or read book Essays in Asset Pricing and Labor Markets written by Mete Kilic and published by . This book was released on 2017 with total page 322 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the first chapter, "Asset Pricing Implications of Hiring Demographics," I document that U.S. industries that shift their skilled workforce toward young employees exhibit higher expected equity returns. The young-minus-old (YMO) hiring return spread comoves negatively with value-minus-growth while being significantly positive on average. Exposure to the YMO spread accounts for a significant portion of annual momentum profits at the industry level. I find that an adjustment of the skilled workforce toward young employees is associated with greater productivity in new capital inputs of an industry. This motivates a risk-based explanation for the YMO spread, and its interaction with value and momentum. A model of investment and hiring where young and experienced employees are equipped with differential roles in production and investment can account for the empirical findings. The second chapter, "Risk, Unemployment, and the Stock Market: A Rare-Event-Based Explanation of Labor Market Volatility," co-authored with Jessica A. Wachter, answers the following questions: What is the driving force behind the cyclical behavior of unemployment and vacancies? What is the relation between job-creation incentives of firms and stock market valuations? Our model features time-varying risk, modeled as a small and variable probability of an economic disaster. A high probability implies greater risk and lower future growth, lowering the incentives of firms to invest in hiring. During periods of high risk, stock market valuations are low and unemployment rises. The model thus explains volatility in equity and labor markets, and the relation between the two.
Download or read book Essays in Empirical Asset Pricing written by Ali Sharifkhani and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In my dissertation, I study different channels through which shocks in the real economy can affect financial asset returns. The first chapter studies immigration policy shocks as a source of risk in the financial markets. Using a comprehensive set of data on H-1B visa petitions, I construct an occupation-level measure for labor market competition between skilled immigrant and local workers. I find that stocks of firms with a high share of labor for which skilled immigrants are close substitutes outperform their peers with a low share. I show that this premium is explained by firms' differential exposures to priced immigration policy shocks that shift the supply of skilled immigrant labor. These shocks differentially impact wages across occupations, leading to an asymmetric effect on firms' cash flows through labor expenditure. In the second chapter, based on a joint work with Esther Eiling and Raymond Kan, we investigate the asset pricing implications of sectoral labor reallocation shocks that change the optimal allocation of workers across industries. We find that a proxy for this type of labor market shocks has very strong predictive power for future stock market returns. We propose a production-based asset pricing model that links the return predictability to time-varying labor adjustment costs. When human capital is tied to the industry, hiring workers from other industries involves more search and training costs. Hence, sectoral reallocation shocks lead to lower returns to hiring and therefore lower future stock returns. In the third chapter, we identify inter-sectoral trade networks as important conduits of industry shocks and provide the first explanation for an empirical regularity in the term structure of industry returns. Specifically, my co-author Mikhail Simutin and I show that industry shocks propagating along this network can feed back to the originating industry, causing an "echo'' - intermediate-term autocorrelation in returns. Adopting techniques from graph theory, we find that the strength of the trade network feedback is a crucial determinant of the echo effect in industry returns. Consistent with limited-information models, the relation between feedback strength and echo profits is strongest in industries with information diffusion frictions along the feedback loop.
Download or read book Climbing and Falling Off the Ladder written by Lawrence Schmidt and published by . This book was released on 2016 with total page 105 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper proposes state-dependent, idiosyncratic tail risk as a key driver of asset prices. I provide new evidence on the importance of tail events in explaining the shape of the idiosyncratic distribution of income growth rates and its evolution over time. I then formalize its role within a tractable affine, jump-diffusion asset pricing framework with recursive preferences, heterogeneous agents and incomplete markets, making my results immediately applicable to a wide class of existing models for aggregate dynamics. Next, I demonstrate its importance using a calibrated model in which agents are exposed to a time-varying probability of experiencing a rare, idiosyncratic disaster. The model, whose parameters are disciplined by the data, matches the level and dynamics of the equity premium. Empirically, stock returns are highly informative about labor market event risk, and, consistent with the model's predictions, initial claims for unemployment, a proxy for labor market uncertainty, is a highly robust predictor of returns.
Download or read book Asset Pricing and Portfolio Choice Theory written by Kerry Back and published by Oxford University Press. This book was released on 2017 with total page 745 pages. Available in PDF, EPUB and Kindle. Book excerpt: Today all would agree that Mexico and the United States have never been closer--that the fates of the two republics are intertwined. Mexico has become an intimate part of life in almost every community in the United States, through immigration, imported produce, business ties, or illegal drugs. It is less a neighbor than a sibling; no matter what our differences, it is intricately a part of our existence. In the fully updated second edition of Mexico: What Everyone Needs to Know(R), Roderic Ai Camp gives readers the most essential information about our sister republic to the south. Camp organizes chapters around major themes--security and violence, economic development, foreign relations, the colonial heritage, and more. He asks questions that take us beyond the headlines: Why does Mexico have so much drug violence? What was the impact of the North American Free Trade Agreement? How democratic is Mexico? Who were Benito Juarez and Pancho Villa? What is the PRI (the Institutional Revolutionary Party)? The answers are sometimes surprising. Despite ratification of NAFTA, for example, Mexico has fallen behind Brazil and Chile in economic growth and rates of poverty. Camp explains that lack of labor flexibility, along with low levels of transparency and high levels of corruption, make Mexico less competitive than some other Latin American countries. The drug trade, of course, enhances corruption and feeds on poverty; approximately 450,000 Mexicans now work in this sector. Brisk, clear, and informed, Mexico: What Everyone Needs To Know(R) offers a valuable primer for anyone interested in the past, present, and future of our neighbor to the South. Links to video interviews with prominent Mexicans appear throughout the text. The videos can be accessed at through The Oxford Research Encyclopedia of Latin American History at http: //latinamericanhistory.oxfordre.com/page/videos/
Download or read book Uncertain Labor Quality and Asset Pricing written by Tor Einarson and published by . This book was released on 1998 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Labor and the Market Value of the Firm written by and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: What role does labor play in a firm's market value? We explore this question using a production-based asset pricing model with frictions in the adjustment of both capital and labor. We posit that hiring of labor is akin to investment in capital and that the two interact, with the interaction being a crucial determinant of the time series behavior of market value. We use aggregate U.S. corporate sector data to estimate firms' optimal hiring and investment decisions and the consequences for firms' value. The model generates a good fit of the data. We decompose the estimated market value, thereby quantifying the link between firms' value and gross hiring flows, employment, gross investment flows, and physical capital. We find that a conventional specification -- quadratic adjustment costs for capital and no hiring costs -- performs poorly. Hiring and investment flows, unlike employment and capital stocks, are volatile and both are essential to account for market value volatility. A key result is that firms' value embodies the value of hiring and investment over and above the capital stock.
Download or read book Asset Pricing with Endogenously Uninsurable Tail Risk written by Hengjie Ai and published by . This book was released on 2018 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies asset pricing and labor market dynamics in a setting in which idiosyncratic risk in human capital is not fully insurable. Firms use long-term contracts to provide insurance to workers, but neither side can fully commit; furthermore, owing to costly and unobservable retention effort, worker-firm relationships have endogenous durations. Uninsured tail risk in labor earnings arises as a part of an optimal risk-sharing scheme. In equilibrium, exposure to the tail risk generates higher aggregate risk premia and higher return volatility. Consistent with data, firm-level labor share predicts both future returns and pass-throughs of firm-level shocks to labor compensation.
Download or read book Automation and the Displacement of Labor by Capital written by Jiri Knesl and published by . This book was released on 2019 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: I examine the asset pricing implications of technological innovations that allow capital to displace labor: automation. I develop a theory in which firms with high share of displaceable labor are negatively exposed to such technology shocks. In the model, firms optimally adopt technology to gain competitive advantage in the product market. Although automation increases an individual firm's competitive advantage, in equilibrium competition erodes profits and decreases firm value. Empirically, I develop a firm-level measure of displaceable labor share, based on detailed job classifications from the O*NET database, and find that firms with high displaceable labor share have negative exposure to technology shocks. A long-short portfolio sorted on this new measure is highly correlated with existing macroeconomic measures of technology shocks. Firms with negative exposure to these technology shocks earn a 4% per year return premium. The premium is positively predicted by decreases in the cost of capital goods. At the firm level, I confirm that a large negative exposure to technology shocks predicts lower employment and profitability following technology shocks, and these effects are amplified by higher within-industry competition.
Download or read book An Equilibrium Asset Pricing Model with Labor Market Search written by Lars-Alexander Kuehn and published by . This book was released on 2012 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: Search frictions in the labor market help explain the equity premium in the financial market. We embed the Diamond-Mortensen-Pissarides search framework into a dynamic stochastic general equilibrium model with recursive preferences. The model produces a sizeable equity premium of 4.54% per annum with a low interest rate volatility of 1.34%. The equity premium is strongly countercyclical, and forecastable with labor market tightness, a pattern we confirm in the data. Intriguingly, search frictions, combined with a small labor surplus and large job destruction flows, give rise endogenously to rare disaster risks a la Rietz (1988) and Barro (2006).
Download or read book Labor Mobility written by Andres Donangelo and published by . This book was released on 2016 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: Labor mobility is the flexibility of workers to walk away from an industry in response to better opportunities. I develop a model in which labor flows make bad times worse for shareholders who are left with capital that is less productive. The model shows that firms face greater operating leverage by providing flexibility to mobile workers. I construct an empirical measure of labor mobility consistent with the model and document an economically significant cross-sectional relation between mobility, operating leverage, and stock returns. I find that firms in mobile industries earn returns over 5% higher than those in less mobile industries.Measure of labor mobility used in the paper is available in my website.
Download or read book Sectoral Labor Reallocation and Return Predictability written by Esther Eiling and published by . This book was released on 2018 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: Sectoral labor reallocation shocks change the optimal allocation of workers across industries. We find that a proxy for this type of labor market shocks has very strong and robust predictive power for future stock market returns. In predictive regressions, the one-year out-of-sample R2 is as high as 14.88%. We propose a production-based asset pricing model that links the return predictability to time-varying labor adjustment costs. When human capital is tied to the industry, hiring workers from other industries involves more search and training costs. Hence, sectoral reallocation shocks lead to lower returns to hiring and therefore lower future stock returns.
