Health Status and Portfolio Choice

Harvey Rosen and Stephen Wu
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Harvey Rosen: Princeton University

No 127, Working Papers from Princeton University, Department of Economics, Center for Economic Policy Studies.

Abstract: This paper analyzes the role that health status plays in household portfolio decisions using data from the first wave of 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 both safe and 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 cross sectional 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 or their planning horizons.

Keywords: Health and Retirement Study; HRS; United States (search for similar items in EconPapers)
JEL-codes: G11 I19 (search for similar items in EconPapers)
Date: 2001-10
New Economics Papers: this item is included in nep-cba, nep-for, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:pri:cepsud:75

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