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Relationship between Labor-Income Risk and Average Return: Empirical Evidence from the Japanese Stock Market

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  • Jagannathan, Ravi
  • Kubota, Keiichi
  • Takehara, Hitoshi

Abstract

In Japan, as in the United States, stocks that are more sensitive to changes in the monthly growth rate of labor income earn a higher return on average. Whereas the stock-index beta can only explain 2 percent of the cross-sectional variation in the average return on stock portfolios, the stock-index beta and the labor beta together explain 75 percent of the variation. The authors find that the labor beta drives out the size effect but not the book-to-market-price effect that is documented in the literature. Copyright 1998 by University of Chicago Press.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Business.

Volume (Year): 71 (1998)
Issue (Month): 3 (July)
Pages: 319-47

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Handle: RePEc:ucp:jnlbus:v:71:y:1998:i:3:p:319-47

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Web page: http://www.journals.uchicago.edu/JB/

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