IDEAS home Printed from https://ideas.repec.org/a/bla/finrev/v59y2024i3p561-587.html
   My bibliography  Save this article

Stock market and the psychological health of investors

Author

Listed:
  • Chang Liu
  • Maoyong Fan

Abstract

Utilizing a national individual‐level medical dataset and the home bias phenomenon in investment, our study shows a strong and robust link between declines in local stock returns and increased antidepressant consumption among investors. This effect intensifies in areas with higher per capita dividend income, suggesting a direct relationship between higher stock ownership and stronger responses. We confirm that portfolio losses, not local economic conditions, are responsible for increased antidepressant usage during market downturns. Using the frequency of psychotherapy sessions yields similar findings. Moreover, our study supports the loss aversion hypothesis as we find positive stock returns do not influence antidepressant usage.

Suggested Citation

  • Chang Liu & Maoyong Fan, 2024. "Stock market and the psychological health of investors," The Financial Review, Eastern Finance Association, vol. 59(3), pages 561-587, August.
    • Handle: RePEc:bla:finrev:v:59:y:2024:i:3:p:561-587
    DOI: 10.1111/fire.12385
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/fire.12385
    Download Restriction: no
    File URL: https://libkey.io/10.1111/fire.12385?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Zoran Ivković & Scott Weisbenner, 2005. "Local Does as Local Is: Information Content of the Geography of Individual Investors' Common Stock Investments," Journal of Finance, American Finance Association, vol. 60(1), pages 267-306, February.
    2. Kniesner, Thomas J. & Powers, Regina H. & Croghan, Thomas W., 2005. "Provider type and depression treatment adequacy," Health Policy, Elsevier, vol. 72(3), pages 321-332, June.
    3. Zoran Ivkovi & Scott Weisbenner, 2007. "Information Diffusion Effects in Individual Investors' Common Stock Purchases: Covet Thy Neighbors' Investment Choices," The Review of Financial Studies, Society for Financial Studies, vol. 20(4), pages 1327-1357.
    4. Hannes Schwandt, 2018. "Wealth Shocks and Health Outcomes: Evidence from Stock Market Fluctuations," American Economic Journal: Applied Economics, American Economic Association, vol. 10(4), pages 349-377, October.
    5. Timothy Erickson & Robert Parham & Toni M. Whited, 2017. "Fitting the errors-in-variables model using high-order cumulants and moments," Stata Journal, StataCorp LP, vol. 17(1), pages 116-129, March.
    6. Nancy Ammon Jianakoplos & Alexandra Bernasek, 2006. "Financial Risk Taking by Age and Birth Cohort," Southern Economic Journal, John Wiley & Sons, vol. 72(4), pages 981-1001, April.
    7. Malcolm Baker & Jeffrey Wurgler, 2007. "Investor Sentiment in the Stock Market," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 129-152, Spring.
    8. Huberman, Gur, 2001. "Familiarity Breeds Investment," The Review of Financial Studies, Society for Financial Studies, vol. 14(3), pages 659-680.
    9. repec:bla:jfinan:v:53:y:1998:i:6:p:1839-1885 is not listed on IDEAS
    10. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    11. David Hirshleifer, 2001. "Investor Psychology and Asset Pricing," Journal of Finance, American Finance Association, vol. 56(4), pages 1533-1597, August.
    12. Joshua D. Coval & Tobias J. Moskowitz, 1999. "Home Bias at Home: Local Equity Preference in Domestic Portfolios," Journal of Finance, American Finance Association, vol. 54(6), pages 2045-2073, December.
    13. J. R. Lockwood & Daniel F. McCaffrey, 2020. "Recommendations about estimating errors-in-variables regression in Stata," Stata Journal, StataCorp LP, vol. 20(1), pages 116-130, March.
    14. McInerney, Melissa & Mellor, Jennifer M. & Nicholas, Lauren Hersch, 2013. "Recession depression: Mental health effects of the 2008 stock market crash," Journal of Health Economics, Elsevier, vol. 32(6), pages 1090-1104.
    15. Nancy Ammon Jianakoplos & Alexandra Bernasek, 2006. "Financial Risk Taking by Age and Birth Cohort," Southern Economic Journal, John Wiley & Sons, vol. 72(4), pages 981-1001, April.
    16. Gambetti, Elisa & Giusberti, Fiorella, 2019. "Personality, decision-making styles and investments," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 80(C), pages 14-24.
    17. Joseph Engelberg & Christopher A. Parsons, 2016. "Worrying about the Stock Market: Evidence from Hospital Admissions," Journal of Finance, American Finance Association, vol. 71(3), pages 1227-1250, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Qian Chen & Xiang Gao & Jianming Mo & Zhouling Xu, 2022. "Market Reaction to Local Attention around Earnings Announcements in China: Evidence from Internet Search Activity," IJFS, MDPI, vol. 10(4), pages 1-26, October.
    2. García, Diego & Norli, Øyvind, 2012. "Geographic dispersion and stock returns," Journal of Financial Economics, Elsevier, vol. 106(3), pages 547-565.
    3. Bradrania, Reza & Gao, Ya, 2024. "Lottery demand, weather and the cross-section of stock returns," Journal of Behavioral and Experimental Finance, Elsevier, vol. 42(C).
    4. David Hirshleife, 2015. "Behavioral Finance," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 133-159, December.
    5. Serkan Karadas & Jorida Papakroni, 2019. "Local predictive ability of analyst recommendations," Review of Financial Economics, John Wiley & Sons, vol. 37(3), pages 351-371, July.
    6. Hirshleifer, David & Teoh, Siew Hong, 2008. "Thought and Behavior Contagion in Capital Markets," MPRA Paper 9164, University Library of Munich, Germany.
    7. Barber, Brad M. & Odean, Terrance, 2013. "The Behavior of Individual Investors," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, volume 2, chapter 0, pages 1533-1570, Elsevier.
    8. Barnes, Spencer, 2021. "Killing in the stock market: Evidence from organ donations," Journal of Behavioral and Experimental Finance, Elsevier, vol. 32(C).
    9. Xinqi Chen & Yilei Luo & Qing Yan, 2024. "Does Extreme Weather Impact Performance in Capital Markets? Evidence from China," Sustainability, MDPI, vol. 16(16), pages 1-22, August.
    10. Tekçe, Bülent & Yılmaz, Neslihan & Bildik, Recep, 2016. "What factors affect behavioral biases? Evidence from Turkish individual stock investors," Research in International Business and Finance, Elsevier, vol. 37(C), pages 515-526.
    11. Baschieri, Giulia & Carosi, Andrea & Mengoli, Stefano, 2016. "Does the earnings quality matter? Evidence from a quasi-experimental setting," Finance Research Letters, Elsevier, vol. 19(C), pages 146-157.
    12. Itzhak Venezia, 2018. "Lecture Notes in Behavioral Finance," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 10751, August.
    13. Antonio Acconcia & Alfredo Del Monte & Luca Pennacchio & Germana Scepi, 2011. "IPO Underpricing and the Location of Firms," CSEF Working Papers 295, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 04 Feb 2021.
    14. Cici, Gjergji & Gehde-Trapp, Monika & Göricke, Marc-André & Kempf, Alexander, 2014. "What they did in their previous life: The investment value of mutual fund managers' experience outside the financial sector," CFR Working Papers 14-11, University of Cologne, Centre for Financial Research (CFR).
    15. Chan, Kalok & Covrig, Vicentiu, 2012. "What determines mutual fund trading in foreign stocks?," Journal of International Money and Finance, Elsevier, vol. 31(4), pages 793-817.
    16. Bo Becker & Zoran Ivković & Scott Weisbenner, 2011. "Local Dividend Clienteles," Journal of Finance, American Finance Association, vol. 66(2), pages 655-683, April.
    17. Hong, Harrison & Kubik, Jeffrey D. & Stein, Jeremy C., 2008. "The only game in town: Stock-price consequences of local bias," Journal of Financial Economics, Elsevier, vol. 90(1), pages 20-37, October.
    18. Dyer, Travis A., 2021. "The demand for public information by local and nonlocal investors: Evidence from investor-level data," Journal of Accounting and Economics, Elsevier, vol. 72(1).
    19. Curatola, Giuliano, 2017. "Portfolio choice and asset prices when preferences are interdependent," Journal of Economic Behavior & Organization, Elsevier, vol. 140(C), pages 197-223.
    20. Brian C. Payne & Jiri Tresl & Geoffrey C. Friesen, 2018. "Sentiment and Stock Returns," Journal of Sports Economics, , vol. 19(6), pages 843-872, August.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:finrev:v:59:y:2024:i:3:p:561-587. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/efaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.