The human capital that matters: expected returns and the income of affluent households
We implement the human capital CAPM (HCAPM) using the income growth of high income households, rather than aggregate income growth, to proxy the return to human capital (HCRT). We find that identifying the HCRT with the income growth of affluent households, those who are most likely to hold stocks, substantially improves the performance of the HCAPM. Specifically, the pricing errors, R-square’s, average returns on factor mimicking portfolios, and performance relative to other macro-finance models uniformly improve as the HCRT is identified with the income growth of successively more affluent households.
|Date of creation:||2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.federalreserve.gov/
More information through EDIRC
|Order Information:||Web: http://www.federalreserve.gov/pubs/feds/fedsorder.html|
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.:
- Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
- Jagannathan, Ravi & Wang, Zhenyu, 1996.
" The Conditional CAPM and the Cross-Section of Expected Returns,"
Journal of Finance,
American Finance Association, vol. 51(1), pages 3-53, March.
- Ravi Jagannathan & Zhenyu Wang, 1996. "The conditional CAPM and the cross-section of expected returns," Staff Report 208, Federal Reserve Bank of Minneapolis.
- Annette Vissing-Jorgensen, 2002. "Limited Asset Market Participation and the Elasticity of Intertemporal Substitution," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 825-853, August.
- Annette Vissing-Jorgensen, 2002. "Limited Asset Market Participation and the Elasticity of Intertemporal Substitution," NBER Working Papers 8896, National Bureau of Economic Research, Inc.
- Jonathan A. Parker & Christian Julliard, 2004.
"Consumption Risk and the Cross-Section of Expected Returns,"
138, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
- Jonathan A. Parker & Christian Julliard, 2005. "Consumption Risk and the Cross Section of Expected Returns," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 185-222, February.
When requesting a correction, please mention this item's handle: RePEc:fip:fedgfe:2008-09. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kris Vajs)
If references are entirely missing, you can add them using this form.