Asset management, human capital, and the market for risky assets
National Bureau of Economic Research, 2008 - Education - 44 pages
Risky-asset prices are conventionally modeled as "fully (information-) revealing". Much less work has been done on how prices get to reveal information. Following the "noisy-prices", rational-expectations approach, our answer focuses on the micro-foundations of information acquisition and the role of human capital in asset, or risk, management. We derive testable propositions on how education and other determinants of asset management affect its intensity, risky-asset demand, and portfolio returns. We derive related insights concerning determinants of the level and volatility of asset prices and equity premiums. Using micro-level data on portfolio choices, we find that education raises both the portfolio share of risky assets and overall portfolio returns, while a measure of the opportunity cost of asset management has the opposite effects. Our results indicate a non-trivial return to education in generating non-wage income. They suggest that educational attainments directly affect the distribution of income as well as earnings.
What people are saying - Write a review
We haven't found any reviews in the usual places.
0E R4V PROF 0SLS 2SLS PW Absolute education premium analysis asset management hypothesis asset management intensity asset prices Behavioral Finance bonds comparative static conditional Constant log(EDU cost of asset data set DEMAND and RETURN demand for risky derive Econ Economics educational attainments empirical equations 29 equilibrium equity premium expected demand expected price financial assets financial investments higher household human capital impact increments information signals investors lndeed lnformation lnWAGE log-normal distribution log(WAGE lower market price model abstracts NBER normally distributed opportunity cost optimal asset management Original overall portfolio returns portfolio composition posterior distribution propositions rate of return Rational Expectation regression results regressor return on financial RETURN regressions return to education rise risk aversion risky asset demand risky assets holdings salaried workers schooling self-employed specific stochastic supply shocks Table TASST testable Uncon unconditional increase Var(P variable wage income wage rate WW no0wage