The Human Capital That Matters: Expected Returns and High-Income Households

Sean D. Campbell, Stefanos Delikouras, Danling Jiang, George M. Korniotis

Research output: Contribution to journalArticlepeer-review

3 Scopus citations


We propose a novel human capital model that decomposes aggregate income risk into high- and low-income risk. We find that high-income risk is priced, while low-income risk is insignificant. The high-income factor alone explains 77% of the cross-sectional variation in the twenty-five size and book-to-market portfolios, earns a risk premium of about 7% per year, and its pricing power extends to the full cross-section of individual stocks. It is also related to the value factor, suggesting that the value premium might be compensation for income risk. Overall, our evidence indicates that high-income risk is an important macroeconomic risk factor. Received April 21, 2010; accepted January 25, 2016, by Editor Geert Bekaert.

Original languageEnglish (US)
Pages (from-to)2523-2563
Number of pages41
JournalReview of Financial Studies
Issue number9
StatePublished - Sep 1 2016

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


Dive into the research topics of 'The Human Capital That Matters: Expected Returns and High-Income Households'. Together they form a unique fingerprint.

Cite this