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This paper aims to examine the impact of labor market frictions on asset pricing and firm valuation.

Labor Market Frictions and Asset Prices

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This paper aims to examine the impact of labor market frictions on asset pricing and firm valuation.
Survey of existing research on labor market frictions and asset pricing frameworks.
Examination of neoclassical labor models with adjustments for frictions such as wage rigidity.
Analysis of labor heterogeneity and financial risks affecting firm value and expected returns.
Labor adjustment costs create quasi-fixed assets that influence firm valuation.
Wage rigidity increases profit volatility, leading to higher required returns based on risk.
Financial frictions intertwine with labor frictions, amplifying default risks and reducing financial flexibility.

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Survey explores how labor market frictions affect asset pricing in firms, suggesting significant financial implications.

Belo et al. (2026) studied this question.

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