The Role of Medical Expenditure Risk in Portfolio Allocation Decisions

Padmaja Ayyagari and Daifeng He

Health Economics, 2017, vol. 26, issue 11, 1447-1458

Abstract: Economic theory suggests that medical spending risk affects the extent to which households are willing to accept financial risk, and consequently their investment portfolios. In this study, we focus on the elderly for whom medical spending represents a substantial risk. We exploit the exogenous reduction in prescription drug spending risk because of the introduction of Medicare Part D in the U.S. in 2006 to identify the causal effect of medical spending risk on portfolio choice. Consistent with theory, we find that Medicare‐eligible persons increased risky investment after the introduction of prescription drug coverage, relative to a younger, ineligible cohort. Copyright © 2016 John Wiley & Sons, Ltd.

Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
https://doi.org/10.1002/hec.3437

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:hlthec:v:26:y:2017:i:11:p:1447-1458

Access Statistics for this article

Health Economics is currently edited by Alan Maynard, John Hutton and Andrew Jones

More articles in Health Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().