Optimal Portfolio Choice and Investment in Education

Egil Matsen and Snorre Lindset

Working Paper Series from Department of Economics, Norwegian University of Science and Technology

Abstract: In this paper we analyze how an individual should optimally invest in her own human capital when she also has financial wealth. We treat the individual’s option to take more education as expansion options and apply real option analysis. 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)
JEL-codes: C61 D14 G11 G13 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2007-07-06
New Economics Papers: this item is included in nep-edu and nep-hrm
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Persistent link: https://EconPapers.repec.org/RePEc:nst:samfok:8707

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