Towards Personal Financial Sustainability Based on Human Capital Analysis in Korea

Jaeyong Yu, Gunyoung Lee and Jang Ho Kim
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Jaeyong Yu: Department of Industrial and Management Systems Engineering, Kyung Hee University, Yongin-si 17104, Gyeonggi-do, Korea
Gunyoung Lee: Department of Industrial and Management Systems Engineering, Kyung Hee University, Yongin-si 17104, Gyeonggi-do, Korea
Jang Ho Kim: Department of Industrial and Management Systems Engineering, Kyung Hee University, Yongin-si 17104, Gyeonggi-do, Korea

Sustainability, 2021, vol. 13, issue 5, 1-13

Abstract: Financial sustainability for individuals has become more important due to the increase in life expectancy. In personalized lifetime financial planning, human capital is critical for incorporating the life-cycle of individuals. This study focuses on human capital modeling based on features such as education level and working industry, and presents how difference in human capital can affect the optimal asset allocation. By analyzing the Korean labor and income panel survey data, fixed effects regression was performed to model human capital and a portfolio model that maximizes utility of total wealth is solved to optimize the lifetime financial plan. The empirical results show that individuals with human capital that are more correlated with stocks are advised to reduce allocation in stocks.

Keywords: financial planning; human capital; investment analysis; panel survey data (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
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