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The risk-return trade-off in human capital investment

  • Christiansen, Charlotte
  • Joensen, Juanna Schroter
  • Nielsen, Helena Skyt

In this paper we analyze investments in human capital assets in a way which is standard for financial assets, but not (yet) for human capital assets. We study mean-variance plots of human capital assets. We compare the properties of human capital returns using a performance measure and by sing tests for mean-variance spanning. A risk-return trade-off is revealed, hich is not only related to the length of education but also to the type of education. We identify a range of educations that are efficient in terms of investment goods, and a range of educations that are inefficient, and may be chosen for consumption purposes.

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Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 14 (2007)
Issue (Month): 6 (December)
Pages: 971-986

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Handle: RePEc:eee:labeco:v:14:y:2007:i:6:p:971-986
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  1. Flavio Cunha & James Heckman & Salvador Navarro, 2005. "Separating uncertainty from heterogeneity in life cycle earnings," Oxford Economic Papers, Oxford University Press, vol. 57(2), pages 191-261, April.
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  17. Telhado Pereira, Pedro & Silva Martins, Pedro, 2002. "Is there a return-risk link in education?," Economics Letters, Elsevier, vol. 75(1), pages 31-37, March.
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