Working Papers Abstracts

  • “Labor Income and the Cross-Section of Asset Returns,” U.C. Berkeley working paper, 2010


           I test whether wage growth of particular demographic groups better explains the cross-section of asset returns than aggregate wage growth.  I use monthly data from the Current Population Survey between 1989 and 2004 to disaggregate labor income growth by age-group.  The test yields two key results.  First, labor income growth of these age groups does not perform better than aggregate income growth in explaining the cross-section of stock returns.  Second, only the labor income growth of middle-aged individuals is priced in stock returns.   These results suggest that the returns to human capital of different generational groups are not only different, but also have a different impact on equilibrium asset returns.