Asset Management, Human Capital, and the Market for Risky Assets
Conventional finance models treat riskyâ€ asset prices as â€œfully (information) revealing.â€ Less work exists on how prices become information revealing. Our answer focuses on the micro foundations of information acquisition and the role of human capital in â€œasset management.â€ We derive testable propositions on how education and the opportunity cost of asset management affect riskyâ€ asset demand, portfolio returns, assetâ€ price volatility, and equity premiums. Using microâ€ level data, we find that education raises the portfolio share of risky assets and overall portfolio returns, whereas wage rates exert opposite effects. We find that the rate of return to education in generating nonwage income is nontrivial.
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- Laura Veldkamp, 2003.
"Media Frenzies in Markets for Financial Information,"
03-20, New York University, Leonard N. Stern School of Business, Department of Economics.
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- Mehra, Rajnish & Prescott, Edward C., 2003.
"The equity premium in retrospect,"
Handbook of the Economics of Finance,
in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 14, pages 889-938
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- Franklin Allen & Stephen Morris & Hyun Song Shin, 2006. "Beauty Contests and Iterated Expectations in Asset Markets," Review of Financial Studies, Society for Financial Studies, vol. 19(3), pages 719-752.
- Shleifer, Andrei, 2000. "Inefficient Markets: An Introduction to Behavioral Finance," OUP Catalogue, Oxford University Press, number 9780198292272, June.
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