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Health and portfolio choices: A diffidence approach

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  • Crainich, David
  • Eeckhoudt, Louis
  • Le Courtois, Olivier

Abstract

The effect of health status on portfolio decisions has been extensively studied from an empirical viewpoint. In this paper, we propose a theoretical model of individuals’ choice of financial assets under bivariate utility functions depending on wealth and health. Our approach makes an extensive use of the diffidence theorem. We establish the conditions under which the share of wealth held in risky assets falls as: (1) individuals’ health status deteriorates and; (2) individuals’ health status becomes risky. These conditions are shown to be related to the behavior of the intensities of correlation aversion and of cross prudence as wealth increases.

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  • Crainich, David & Eeckhoudt, Louis & Le Courtois, Olivier, 2017. "Health and portfolio choices: A diffidence approach," European Journal of Operational Research, Elsevier, vol. 259(1), pages 273-279.
    • Handle: RePEc:eee:ejores:v:259:y:2017:i:1:p:273-279
    DOI: 10.1016/j.ejor.2016.10.022
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    5. Jimin Hong & Kyungsun Kim, 2025. "Self-protection against a health risk and saving: an analysis of income and health effects," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 50(2), pages 232-257, September.
    6. Pouget, Sébastien & Brodback, Daniel & Guenster, Nadja & Wang, Ruichen, 2025. "Investor Valuation for Socially Responsible Assets: A Willingness to Pay Experiment," TSE Working Papers 2025-1683, Toulouse School of Economics (TSE).
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    8. Christos I. Giannikos & Andreas Kakolyris & Tin Shan Suen, 2025. "Risk attitudes and private disability insurance holdings," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 49(1), pages 23-44, March.
    9. Sylvie Démurger & Siwar Khelifa & Béatrice Rey, 2023. "Rural-urban migration as a risk coping strategy: The role of income differentials," IRENE Working Papers 23-03, IRENE Institute of Economic Research.
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