Search

This paper investigates the determinants of value and growth investing in a large administrative panel of Swedish residents over the 1999-2007 period. We document strong relationships between a household's portfolio tilt and the household's financial and demographic characteristics. Value investors have higher financial and real estate wealth, lower leverage, lower income risk, lower human capital, and are more likely to be female than the average growth investor. Households actively migrate to value stocks over the life-cycle and, at higher frequencies, dynamically offset the passive variations in the value tilt induced by market movements. We verify that these results are not driven by cohort effects, financial sophistication, biases toward popular or professionally close stocks, or unobserved heterogeneity in preferences. We relate these household-level results to some of the leading explanations of the value premium.

We use French matched employer-employee data to track skilled individuals entering the labor market during the late 1990s tech bubble. The boom led to a sharp increase in the share of skilled entrants in the tech sector, which offers relative higher wages at the time. When the boom ends, however, the wage premium reverses and these skilled workers end up with a 5.5% wage discount ten years out, relative to similar peers who started in a non-tech sector. Other moments of the wage distribution of the boom, pre-boom, and post-boom cohorts are inconsistent with explanations based on a selection effect or a cycle effect. Instead, we provide suggestive evidence that workers allocated to the booming tech sector accumulate human capital early in their career that rapidly becomes obsolete.

Extant research has highlighted the importance of resource reconfiguration for firm performance and has identified important drivers of the reconfiguration of macro-level resources, e.g. business units, focusing primarily on supply-side factors. Yet less is known about drivers of the reconfiguration of micro-level resources, e.g. human assets, and about the role which demand-side factors play in resource reconfiguration. We address these gaps and investigate how client-related factors influence the reconfiguration of micro-level resources in human-asset-intensive firms. Using fine-grained data on law firms advising on M&A mandates, we find that law firms are less likely to reconfigure their human assets (lawyers) on mandates for high-status clients, but more likely to reconfigure them when a client has a greater proclivity to switch business between multiple suppliers. Law firms also reconfigure their human assets less for incoming client projects when they have provided prior M&A services to the client, but they are more likely to reconfigure them when the client relationship has a broader scope. Finally, we also show that the size of a firm's client portfolio lowers reconfiguration. Our paper extends the literature on resource reconfiguration by explicating antecedents of the reconfiguration of micro-level resources and by highlighting the role demand-side factors play in it. We also contribute to the strategic human capital literature by showing how demand-side factors shape human capital deployment. Finally, we also add to the micro-foundations of resource-based theory by studying important micro-foundational processes underlying a firm's capacity to reconfigure its resources.

Extant research suggests that hiring experts during economic downturns can improve firm financial performance. However, recessionary labor markets deepen the challenges facing hiring firms, calling to question both the firm-level benefits and the tactics of acquiring talent when demand for a firm’s business is declining. We theorize and find that hiring expert talent during a recession actually weakens firm performance in the context of knowledge-based services. Notably though, we find firms can effectively attenuate the negative hiring effect by targeting particular labor pools, underlining the significance of gaining human capital advantages through focused sourcing. We test our hypotheses using a longitudinal sample of large U.S. corporate law firms between 2002 and 2010.

I structurally estimate a life-cycle model of portfolio choices that incorporates the relationship between stock market returns and the cross-sectional skewness of idiosyncratic labor income shocks. The cyclicality of this skewness can explain (i) why young households with modest financial wealth do not participate in the stock market and (ii) why, conditional on participation, the share of financial wealth invested in equity slightly increases with age until retirement. With an estimated relative risk aversion of 5 and yearly participation cost of $290, the model matches the evolution of wealth, of stock market participation and of the equity share of participants over the life-cycle. Without cyclical skewness, the same model requires a risk aversion above 10 or a participation cost above $1,000 to match the average equity share and cannot explain its decline over the life-cycle. Nonetheless, cyclical skewness reduces the aggregate demand for equity by at most 15%.