Optimal Portfolio Choice and Investment in Education
AbstractIn 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.
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Bibliographic InfoPaper provided by Department of Economics, Norwegian University of Science and Technology in its series Working Paper Series with number 8707.
Length: 16 pages
Date of creation: 06 Jul 2007
Date of revision:
Optimal portfolio choice; Investment in human capital; Hedging demand;
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-08-27 (All new papers)
- NEP-EDU-2007-08-27 (Education)
- NEP-HRM-2007-08-27 (Human Capital & Human Resource Management)
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