A further look at household portfolio choice and health status |
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| Institution: | 1. Université Paris-Dauphine, PSL Research University, LEDa, Place du Maréchal de Lattre de Tassigny, F-75775 Paris cedex, France;2. EDHEC Business School, Lille, France;1. Department of Economics, University of Verona, Via Cantarane 24, Verona 37129, Italy;2. Department of Economics and Management, University of Brescia, Via San Faustino 74/b, Brescia 25122, Italy;3. Department of Economics, University of Bologna, Piazza Scaravilli, 2, Bologna 40126, Italy;1. Nanyang Technological University, 50 Nanyang Avenue, Singapore 639798, Singapore;2. Mahidol University, 69 Vipawadee Rangsit Rd., Bangkok 10400, Thailand;3. Erasmus University Rotterdam, Burgemeester Oudlaan 50, 3062 PA Rotterdam, The Netherlands;4. University of Pennsylvania, St 3000 SH-DH, 3620 Locust Walk, Philadelphia, PA 19104, United States, and NBER.;5. Bocconi University, Via Roberto Sarfatti, 25, 20136 Milan, Italy |
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| Abstract: | This paper investigates the effect of changes in health status on household financial wealth and financial portfolio choice. It is shown that the impact of health events on household financial and non-financial wealth is asymmetric. A diagnosis of a new disease leads to a larger decrease in financial wealth than in non-financial wealth. Moreover, we find that the puzzle pertaining to the relationship between health status and portfolio choice discussed in the extant literature generally disappears after controlling for differences in the amount of financial assets held by healthy and sick people. The results suggest that the effect of changes in health status on household financial portfolios is indirect. A health shock significantly reduces household total financial wealth, in turn leading households to restructure the composition of their financial assets. |
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