Relationship between labor-income risk and average return: Empirical evidence from the Japanese stock market, Journal of Business
In Japan as in the United States, stocks that are more sensitive to changes in the monthly growth rate of labor income earn a higher return on average. Whereas the stock-index beta can only explain 2% of the cross-sectional variation in the average return on stock portfolios, the stock-index beta and the labor beta together explain 75% of the variation. We find that the labor beta drives out the size effect but not the book-to-market-price effect that is documented in the literature.
Ravi Jagannathan, Keiichi Kubota, Hitoshi Takehara
Jagannathan, Ravi, Keiichi Kubota, and Hitoshi Takehara. 1998. Relationship between labor-income risk and average return: Empirical evidence from the Japanese stock market. Journal of Business. 71(3): 319-347.