ABSTRACT Human capital is one of the largest assets in the economy and in theory may play an important role for asset pricing. Human capital is heterogeneous across investors. One source of heterogeneity is industry affiliation. I show that the cross‐section of expected stock returns is primarily affected by industry‐level rather than aggregate labor income risk. Furthermore, when human capital is excluded from the asset pricing model, the resulting idiosyncratic risk may appear to be priced. I find that the premium for idiosyncratic risk documented by several empirical studies depends on the covariance between stock and human capital returns.

Abstract Emerging equity markets have become increasingly interrelated over the past two decades. For a sample of thirty-two emerging markets from four different regions, we find significant positive time trends in cross-country correlations within regions, correlations across regions, and in comovements with the rest of the world. Furthermore, we examine the economic mechanisms that drive these trends. We find that official market liberalization, a continuous measure of equity market openness, equity market development, and to some extent, trade openness all play a role. However, we show important heterogeneity across regions, both in the speed at which comovements increase over time and in the underlying macroeconomic channels.

Abstract This paper uses style analysis to investigate whether Euro-zone equity returns are driven by country or industry effects over the 1990–2008 period. We find that before the introduction of the Euro, country effects dominate, while industry effects prevail after 1999. This reversal is driven mainly by the countries that were least integrated in the Economic and Monetary Union (EMU) and world markets in the early 1990s and for which the EMU convergence process led to rapid strengthening of linkages with the core Euro-zone. For markets with stronger economic linkages, industry effects dominate both before and after the introduction of the Euro.