Egil Matsen () (Department of Economics, Norwegian University of Science and Technology) Snorre Lindset () (Department of Industrial Economics, Norwegian University of Science and Technology, and Trondheim Business School)
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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.
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Paper provided by Department of Economics, Norwegian University of Science and Technology in its series Working Paper Series with number
8707.