Human Capital and Capital Market Equilibrium
Eugene F. Fama
University of Chicago, Chicago, IL 60637
G. William Schwert
University of Rochester, Rochester, NY 14627
and National Bureau of Economic Research
Journal of Financial Economics, 4 (January 1977) 95-125
This paper finds that extending popular two-parameter models of capital market equilibrium to allow for the
existence of non-marketable human capital does not provide better empirical descriptions of the expected return-risk
relationship for marketable securities than those that come out of simpler models. This conclusion arises from the
fact that relationships between the return on human capital and the returns on various marketable assets are weak, so
that the model that includes human capital leads to estimates of risk for marketable assets indistinguishable from
those of simpler models.
Key words: Human capital, Capital asset pricing model
JEL Classifications: G12, G14, J33
Cited 33 times in the SSCI through April 1996
© Copyright 1977, Elsevier
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