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The Effect of the Growth in Labor Hours per Worker on Future Stock Returns, Hiring, and Profitability

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  • Li Gu
  • Dayong Huang

Abstract

High growth rate of labor hours per worker signals low future stock returns and high future hiring rate. As labor hours are substituted for hiring, hiring becomes less responsive to future discount rate. The growth rate of the number of labor hours per worker does not appear to be related to future profitability. Our findings are largely consistent with a dynamic labor hours asset pricing model that features large asymmetric costs in adjusting the number of workers and small costs in adjusting the number of hours per worker.

Suggested Citation

  • Li Gu & Dayong Huang, 2017. "The Effect of the Growth in Labor Hours per Worker on Future Stock Returns, Hiring, and Profitability," Review of Finance, European Finance Association, vol. 21(6), pages 2249-2276.
    • Handle: RePEc:oup:revfin:v:21:y:2017:i:6:p:2249-2276.
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    File URL: http://hdl.handle.net/10.1093/rof/rfw049
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    References listed on IDEAS

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    Cited by:

    1. Kothari, Pratik & O’Doherty, Michael S., 2023. "Job postings and aggregate stock returns," Journal of Financial Markets, Elsevier, vol. 64(C).

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    More about this item

    Keywords

    Labor hours per worker; Asset returns;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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