Human capital investment and optimal portfolio choice

Snorre Lindset and Egil Matsen

The European Journal of Finance, 2011, vol. 17, issue 7, 539-552

Abstract: We analyze how an individual should optimally invest in human capital when he also has financial wealth. We treat the individual's possibilities to take more education as expansion options and apply real option analysis. In addition, we characterize the individual's optimal consumption strategy and portfolio weights. The individual has a demand for hedging financial risk, labor income risk, and also wage level risk.

Keywords: optimal portfolio choice; investment in human capital; hedging demand (search for similar items in EconPapers)
Date: 2011
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DOI: 10.1080/1351847X.2010.495480

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