Relationship between Labor-Income Risk and Average Return: Empirical Evidence from the Japanese Stock Market

Ravi Jagannathan, Keiichi Kubota and Hitoshi Takehara

The Journal of Business, 1998, vol. 71, issue 3, 319-47

Abstract: In Japan, as in the United States, stocks that are more sensitive to changes in the monthly growth rate of labor income earn a higher return on average. Whereas the stock-index beta can only explain 2 percent of the cross-sectional variation in the average return on stock portfolios, the stock-index beta and the labor beta together explain 75 percent of the variation. The authors find that the labor beta drives out the size effect but not the book-to-market-price effect that is documented in the literature. Copyright 1998 by University of Chicago Press.

Date: 1998
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Working Paper: Relationship between labor-income risk and average return: empirical evidence from the Japanese stock market (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jnlbus:v:71:y:1998:i:3:p:319-47

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