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Prediction Ability

  • Katsuya Takii

    (Osaka University)

This paper models the value of managerial human capital as a function of the ability to predict profitability in the presence of risk. The model implies that the marginal productivity of prediction ability increases with increasing risk and that managers with high prediction ability will tend to work in risky industries. This prediction contrasts with the traditional view that talented managers concentrate in large firms. Business School placement data supports this hypothesis; talented Business School graduates choose to work in risky industries. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/S1094-2025(02)00009-1
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 6 (2003)
Issue (Month): 1 (January)
Pages: 80-98

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Handle: RePEc:red:issued:v:6:y:2003:i:1:p:80-98
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  1. Kihlstrom, Richard E & Laffont, Jean-Jacques, 1979. "A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 719-48, August.
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  15. Katsuya Takii, 2004. "Prediction Ability and Investment under Uncertainty," Industrial Organization 0406005, EconWPA.
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  18. Katsuya Takii, 2000. "Prediction Ability," Econometric Society World Congress 2000 Contributed Papers 1411, Econometric Society.
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