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Labor Income, Conditional CAPM, and the Cross Section of Stock Returns in Taiwan

Journal of Financial Studies

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Title Labor Income, Conditional CAPM, and the Cross Section of Stock Returns in Taiwan
 
Creator I-Hsiang Huang
 
Description Using Taiwanese stock data, this paper shows that the explanatory power of static CAPM for cross-sectional stock portfolio return is enhanced when return on human capital is considered in measuring aggregate wealth. Unlike the evidence from the U.S. market that the performance of conditional CAPM is considerably better than static CAPM, the evidence from Taiwan stock market indicates that the conditional CAPM performs slightly better than the statistic CAPM and the static CAPM with the consideration of labor income risk. The result can be explained by the fact that the small-growth firms and the big-value firms have significantly positive pricing errors and negative pricing errors respectively. The result does not change substantially after taking various important factor sensitivities and portfolio characteristics into account.
Key words: CAPM, labor income risk, systematic risk, conditioning variable, pricing error
 
Publisher Journal of Financial Studies
財務金èžå­¸åˆŠ
 
Date 2011-03-10
 
Type —
 
Format application/pdf
 
Identifier http://www.jfs.org.tw/index.php/jfs/article/view/2011056
 
Source Journal of Financial Studies; Vol 17, No 1 (2009); 41
財務金èžå­¸åˆŠ; Vol 17, No 1 (2009); 41
 
Language —