Return and risk of human capital contracts
AbstractHuman capital contracts give private investors the right to share of students' future earnings in return for a financial contribution during their studies. Although still rarely used, human capital contracts could not only help to completement limited public funding for higher education but might also be an alternative to traditional financial assets. Using a dataset covering 1% of German households for the period 1995-2009, we analyse the return and risk properties that can be expected from human capital contracts. We find that funds of human capital contracts provide low risk exposures to stocks and bonds. As a result, risk-adjusted returns of funds of human capital contracts are signicantly positive under fairly weak conditions. Thus, human capital contracts potentially offer large diversification benefits for investors and might be a way to improve the state's educational budget --
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Bibliographic InfoPaper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 13-108.
Date of creation: 2013
Date of revision:
human capital returns; human capital contracts; risk and return of non-traded assets; mean-variance spanning tests;
Find related papers by JEL classification:
- I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-12-29 (All new papers)
- NEP-HRM-2013-12-29 (Human Capital & Human Resource Management)
- NEP-LAB-2013-12-29 (Labour Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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