Portfolio Choice and Health Status

By Harvey S. Rosen, Stephen Wu. 2004

457 citations recorded by the source corpus.

This paper analyzes the role that health status plays in household portfolio decisions using data from the Health and Retirement Study. The results indicate that health is a significant predictor of both the probability of owning different types of financial assets and the share of financial wealth held in each asset category. Households in poor health are less likely to hold risky financial assets, other things (including the level of total wealth) being the same. Poor health is associated with a smaller share of financial wealth held in risky assets and a larger share in safe assets. We find no evidence that the relationship between health status and portfolio allocation is driven by third variables' that simultaneously affect health and financial decisions. Further, the relationship between health status and portfolio choice does not appear to operate through the effect of poor health on individuals' attitudes toward risk, their planning horizons, or their health insurance status.

Subfields: Accounting, Economics and Econometrics, General Health Professions

View Paper: https://www.semanticscholar.org/paper/a07f94c6c5ab76905499c9b3bb6a65569a19c8eb

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Citations in the corpus

A further look at household portfolio choice and health status (2006, methodology): “In their study, Rosen and Wu (2004) use a quadratic function of total wealth to control for the wealth effect while we use logarithm functions of financial and non-financial wealth.”
Health Risk and Portfolio Choice (2008, methodology): “Rosen and Wu (2004) showed a robust association between fair or poor health status and safe portfolios in the Health and Retirement Study.”
Cognitive abilities and portfolio choice (2010, unknown): “7 Schaie (1989) points out that cognitive decline starts at the age of fifty and that memory is the first function to be affected.”
Household Financial Decision Making Amidst the COVID-19 Pandemic (2020, unknown): “…Atella, Brunetti, and Maestas 2012; Berkowitz and Qiu 2006; Cardak and Wilkins 2009; Gao, Liu, and Shi 2020; Heimer, Myrseth, and Schoenle 2019; Rosen and Wu 2004), education (e.g., Atella, Brunetti, and Maestas 2012; Berkowitz and Qiu 2006; Cardak and Wilkins 2009; Gallagher and Hartley 2017;…”
What Matters to Individual Investors? Evidence from the Horse's Mouth (2018, background): “Rosen and Wu (2004) also find that households in poor health hold a lower share in risky assets.”
Financial Literacy, Retirement Planning and Household Wealth† (2012, unknown): “For example, studies have highlighted the role of precautionary saving motives (Hubbard, Skinner and Zeldes, 1995), longevity and bequests (Hurd, 1989), different economic opportunities across cohorts (Kapteyn, Alessie and Lusardi, 2005), self-control problems (Laibson, 1997; Benartzi and Thaler, 20”
Fast profits: Investor sentiment and stock returns during Ramadan (2012, background): “Rosen and Wu (2004) report that households in good health are inclined to hold a greater share of risky assets in their portfolios.”
Are risk preferences stable? Comparing an experimental measure with a validated survey-based measure (2008, background): “Using the HRS, Lusardi (1998) found that a categorical measure of risk aversion was significantly associated with wealth accumulation, and Rosen and Wu (2004) reported that a risk-taking indicator was associated with risky asset ownership.”
Trust, sociability and stock market participation (2011, unknown): “Households with health problems are discouraged from investing in stocks according to Rosen and Wu (2004). In order to take into account the effect of adverse health conditions we include as explanatory variables both a subjective (self-reported health) and an objective”
The determinants of household risky asset holdings: Australian evidence on background risk and other factors (2009, unknown): “This is at odds with findings of previous researchers, such as Guiso et al (1996) and Rosen and Wu (2005). However, the point estimates are consistent with a negative association between health and risky asset holdings.”
How Deep is the Annuity Market Participation Puzzle (2007, background): “More generally, Rosen and Wu (2004) nd evidence from the Health and Retirement Survey that health status a¤ects portfolio choice and stock market participation.”
Nature or Nurture: What Determines Investor Behavior? (2010, unknown): “For example, Rosen and Wu (2004) find that poor health status results in a smaller share invested in equities, all”