Advances in Management and Applied Economics

Impact of Labor and Capital Investment on Investor Idiosyncratic Risk

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• Abstract 

   

  Fixed Assets and Human Resources are two factors of production that affects idiosyncratic risk of investors in a business. This research uses the proxy variables of the residual standard deviation. This research is based on the years 2007 to 2017.  The companies at the over-the-counter market in Taiwan and Black, Jensen & Scholes proposed One Factor Model in 1972. Fama & French proposed a ThreeFactor-Model and Five-Factor-Model in 1993 and 2005. These models tested whether the company’s investment in fixed assets and human resources will have effects on the idiosyncratic risk of investors’ investment. The result of the study found two consequences as follows: 

  1. The company’s investment in fixed assets significantly correlated to investor idiosyncratic risk. 

  2. The company’s investment in human resources significantly correlated to investor idiosyncratic risk. 

   

  JEL classification numbers: M40, M41 Keywords: Idiosyncratic Risk, Human Resources, Fixed Assets