Human capital, asset allocation, and life insurance

Peng Chen*, Roger G. Ibbotson, Moshe A. Milevsky, Kevin X. Zhu

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

45 Citations (Scopus)


Financial planners and advisors increasingly recognize that human capital must be taken into account when building optimal portfolios for individual investors. But human capital is not simply another pre-endowed asset class; it contains a unique mortality risk in the form of the loss of future income and wages in the event of the wage earner's death. Life insurance hedges this mortality risk, so human capital affects both optimal asset allocation and demand for life insurance. Yet, historically, asset allocation and life insurance decisions have been analyzed separately. This article develops a unified framework based on human capital that enables individual investors to make these decisions jointly.

Original languageEnglish
Pages (from-to)97-109
Number of pages13
JournalFinancial Analysts Journal
Issue number1
Publication statusPublished - Jan 2006
Externally publishedYes


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