Equity market valuation of human capital and stock returns

Christos Pantzalis and Jung Chul Park

Journal of Banking & Finance, 2009, vol. 33, issue 9, pages 1610-1623

Abstract: We investigate whether and how well firms' stock market valuations reflect their employees' collective skills and effectiveness relative to that of their industry peers and competitors. We devise a relative stock market valuation measure of human capital intangibles (EVHC) and find that portfolios of low EVHC firms systematically outperform portfolios of high EVHC firms by an average 1.34% per month. However, this is primarily a small firms effect, because for large firms the excess returns of the arbitrage portfolio that is long on the low EVHC stocks and short on the high EVHC stocks is zero. Our results suggest that reliance on human capital intangibles may proxy for risk not fully accounted for by conventional asset pricing models, or alternatively, that the market cannot correctly price human capital intangibles for small size firms.

Keywords: Human; capital; intangibles; Mispricing (search for similar items in EconPapers)
Date: 2009

Downloads: (external link)
http://www.sciencedirect.com/science/article/B6VCY ... 2c9cfdb8a09c0ebee98a
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:eee:jbfina:v:33:y:2009:i:9:p:1610-1623

Access Statistics for this article

Journal of Banking & Finance is edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Series data maintained by Heidi Boesdal ().