Labor Rigidity and the Dynamics of the Value Premium

Roberto Marfè
Authors registered in the RePEc Author Service: Roberto Marfe ()

No 429, Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: This paper empirically and theoretically investigates the relation between labor rigidity and the value premium. Aggregate labor rigidity shifts dividend risk towards the short horizon and enhances the pricing of short-run risk. In turn, shorter duration equity deserves a premium over longer duration equity, that is the value premium obtains. Con- sistently, labor-share variation strongly explains the contemporaneous and intertemporal excess return of value firms over growth firms. A closed-form general equilibrium model reproduces the term-structure effect of labor rigidity and naturally gives rise to the value premium and its dynamics. The model is robust to many features of financial markets.

Keywords: value premium; labor rigidity; term-structure; predictability; duration (search for similar items in EconPapers)
JEL-codes: D51 E21 G12 (search for similar items in EconPapers)
Pages: pages 56
Date: 2015
New Economics Papers: this item is included in nep-cfn, nep-mac and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Labor Rigidity and the Dynamics of the Value Premium (2017)
Working Paper: Labor Rigidity and the Dynamics of the Value Premium (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:cca:wpaper:429

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