Time, wealth, and human capital as determinants of asset allocation
DOI:
https://doi.org/10.61190/fsr.v13i3.4793Keywords:
Life-cycle hypothesis, Retirement accounts, Time horizon, Asset allocation, Total wealth portfolioAbstract
This paper provides a theoretical model for individuals to make asset allocation decisions based on their value of leisure time, risk tolerance, and a retirement goal. As individuals go through life cycles financial wealth increases while human capital and time decrease. A critical point is idcntilicd where individuals maximize leisure time and financial wealth. The model suggests basing as. ct allocation decisions on the level or wealth in relationship to the retirement goal and time, rather than the age or the individual typically used in investment planning.
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