Return and risk of human capital contracts

Arbeitspapier

Human capital contracts give private investors the right to share of students' future earnings in return for a financial contribution during their studies. Although still rarely used, human capital contracts could not only help to completement limited public funding for higher education but might also be an alternative to traditional financial assets. Using a dataset covering 1% of German households for the period 1995-2009, we analyse the return and risk properties that can be expected from human capital contracts. We find that funds of human capital contracts provide low risk exposures to stocks and bonds. As a result, risk-adjusted returns of funds of human capital contracts are signicantly positive under fairly weak conditions. Thus, human capital contracts potentially offer large diversification benefits for investors and might be a way to improve the state's educational budget

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ZEW Discussion Papers ; No. 13-108

Classification and Topics

• Classification: Wirtschaft ; Analysis of Education ; Human Capital; Skills; Occupational Choice; Labor Productivity ; Portfolio Choice; Investment Decisions ; Asset Pricing; Trading Volume; Bond Interest Rates
• Subject: human capital returns ; human capital contracts ; risk and return of non-traded assets ; mean-variance spanning tests

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kroencke, Tim A. ; Muehler, Grit ; Sprietsma, Maresa
• Event: Veröffentlichung
• (who): Zentrum für Europäische Wirtschaftsforschung (ZEW)
• (where): Mannheim
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/88602
• URN: urn:nbn:de:bsz:180-madoc-353004
• Last update: 10.03.2025, 11:41 AM CET