Resumen de Labor hiring, investment, and stock return predictability in the cross section
Frederico Belo, Xiaoji Lin, Santiago Bazdresch
We study the impact of labor market frictions on asset prices. In the cross section of US firms, a 10 percentage point increase in the firm's hiring rate is associated with a 1.5 percentage point decrease in the firm's annual risk premium. We propose an investment-based model with stochastic labor adjustment costs to explain this finding. Firms with high hiring rates are expanding firms that incur high adjustment costs. If the economy experiences a shock that lowers adjustment costs, these firms benefit the most. The corresponding increase in firm value operates as a hedge against these shocks, explaining the lower risk premium of these firms in equilibrium.
