Bassi, Laurie, Paul Harrison, Jens Ludwig, and Daniel McMurrer. "The Impact of U.S. Firms' Investments in Human Capital on Stock Prices." Working Paper, June 2004.

This study relates training expenditures to subsequent-year stock returns for 388 U.S. companies for the 1997-1999 time period. Training data were taking from the American Society for Training and Development's Benchmarking Service. Financial and returns data came from Compustat.

Finds that expenditures on training have a statistically significant positive effect on returns, even after adjusting for variables such as ROA, industry, and price momentum. Findings were most dramatic for technical training (p<0.01), though fundamental skills (such as interpersonal communication, basic skills, and safety compliance) and firm-specific skills also were significant.
The direction of causality is explored in several ways, most notably by searching for predictors of above-average training expenditures. Surprisingly, the study finds little or no correlation between past profitability and subsequent training expenditures. Financial leverage is shown to have a statistically significant (p<0.05) negative impact on training. Membership in the chemical, telecommunications, and technology industries had a statistically significant positive impact. The authors conclude that training precedes outperformance, not vice-versa.

The paper also describes the performance of portfolios managed by Bassi Asset Management (the first was started in December 2001, additional portfolios were launched in Jnuary 2003), which are managed with a view toward capturing the returns from this effect. The authors note that all of these portfolios have outperformed the S&P 500 since inception.