What is the HCPM?

The HCPM (Human Cpaital Pricing Model) is a management tool for the valuation of human capital. Human capital represents an important factor for the valuation of firms in knowledge intensive industries. Our tool allows the risk-adjusted valuation of human capital and investments in qualified human capital. Models based on capital market theory (Capital Asset Pricing Model (CAPM) und Arbitrage Pricing Theory (APT)) are applied and extended for the development of the Human Capital Pricing Model (HCPM).


How does it work?

The basic idea is a modification of the Capital Asset Pricing Models (CAPM) that allows the inclusion of human capital. We use a reinterpretation and appropriate operationalization of CAPM variables (cf. exhibit).

Where can I find literature on the HCPM?

Please find below some references for the field of human capital valuation and CAPM:

Alchian, A., H. Demsetz, Production, Information Costs, and Economic Organization, in: American Economic Review, 1972, p. 777-795

Becker, G. S., Human Capital. A Theoretical and Empirical Analysis With Special Reference to Education, Chicago, 3 rd edition, 1993

Bender, C., Röhling, T., Ansätze zur Bewertung und Risikomessung von Humankapital, in: Kossbiel, Hugo (Hrsg.), Modellgestützte Personalentscheidungen, Bd. 5, München u.a., R. Hampp Verlag, 2001, p. 27-39

Brealey, R.A., S. C. Myers, Principles of Corporate Finance, 5. Aufl., New York, 1996

Fama, E.F., Schwert, G.W., Human Capital and Capital Market Equilibrium, in: Journal of Financial Economics, 4, 1977, p. 95-125

Liberman, J., Human Capital and the Financial Capital Market, in: Journal of Business, Vol. 53, No. 2, 1980, p. 164-191

Lintner, J., "The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolio and Capital Budgets", in: Review of Economics and Statistics, February 1965, p. 13-37

Robbers, T., Investitionen in berufliches Humankapital und die Absicherung erwarteter Erträge, Köln, 1993, zugl.: Münster, Univ., Diss., 1992

Ross, St. A., The Arbitrage Theory of Capital Asset Pricing, in: Journal of Economic Theory 13, 1976, p. 341-360

Ross, St. A., Return, Risk and Arbitrage, in: Risk and Return in Finance, Vol. 1, Hrsg. von I. Friend und J.L. Bicksler, Cambridge/Mass. 1977, p. 189-218

Sharpe, W. F., "Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk", Journal of Finance, September 1964, p. 425-452

Steiner, M., T. Nowak, Zur Bestimmung von Risikofaktoren am deutschen Aktienmarkt auf Basis der Arbitrage Pricing Theory, in: DBW 1994, p. 347-362

Thurow, L.C., Investment in Human Capital, Belmont, 1970