Untangling the Value Premium with Labor Shares

• 成果类型: Article
• 署名作者: Donangelo, Andres
• 署名单位: University of Texas System; University of Texas Austin
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhaa022
• 发表日期: 2021
• 页码: 451
• 关键词: cross-section; Operating leverage; adjustment costs; corporate-investment; wage rigidity; RISK; DYNAMICS; returns; shocks; drives

摘要

This paper quantifies the relative importance of labor-induced operating leverage at explaining the value premium. I extend a traditional variance decomposition methodology using labor shares to disentangle labor leverage from the value premium and from the value spread and from the variation in profitability levels and growth. My extended decomposition shows that labor leverage explains approximately 50% of the value premium, whereas profitability and growth-based mechanisms explain the other 50%. I propose a tractable production-based asset-pricing model that qualitatively and quantitatively explains this finding, as well as the relation between book-to-market ratios, discount rates, profitability, and future growth.