Abstract
Previous studies have identified a negative relation between firms' hiring rates and future stock returns in the cross-section.We document that this relation is significantly steeper in industries that rely relatively more on high-skill workers than low-skill workers. A longshort portfolio sorted on firm-level hiring rate earns an average annual return of 8.6% in high-skill industries, and only 0.9% in low-skill industries. Moreover, this pattern is not explained by the standard CAPM. These findings are consistent with a neoclassical model with labor force heterogeneity and labor market frictions if it is more costly to replace high-skill than low-skill workers.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 3669-3709 |
| Number of pages | 41 |
| Journal | Review of Financial Studies |
| Volume | 30 |
| Issue number | 10 |
| DOIs | |
| State | Published - Oct 1 2017 |
Bibliographical note
Publisher Copyright:© 2017 The Author. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved.
