The Money Value of a Man
56 Pages Posted: 9 Apr 2012
There are 2 versions of this paper
The Money Value of a Man
The Money Value of a Man
Date Written: April 3, 2012
Abstract
This paper posits a notion of the value of an individual’s human capital and the associated return on human capital. These concepts are examined using U.S. data on male earnings and financial asset returns. We decompose the value of human capital into a bond, a stock and a residual value component. We find that (1) the bond component of human capital is larger than the stock component at all ages, (2) the value of human capital is far below the value implied by discounting earnings at the risk-free rate, (3) mean human capital returns exceed stock returns early in life and decline with age and (4) human capital returns and stock returns have a small positive correlation over the working lifetime.
Keywords: Value of Human Capital, Return on Human Capital, Asset Pricing, Idiosyncratic and Aggregate Risk
JEL Classification: D91, E21, G12, J24
Suggested Citation: Suggested Citation