Seminar series
Date
Tue, 28 Jan 2014
Time
12:30 -
13:30
Location
Oxford-Man Institute
Speaker
Fernando Zapatero
Organisation
University of Southern California
The finance literature documents a relation between labor income and
the cross-section of stock returns. One possible explanation for this
is the hedging decisions of investors with relative wealth concerns.
This implies a negative risk premium associated with stock returns
correlated with local undiversifiable wealth, since investors are
willing to pay more for stocks that help their hedging goals. We find
evidence that is consistent with these regularities. In addition, we
show that the effect varies across geographic areas depending on the
size and variability of undiversifiable wealth, proxied by labor income.