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Health Status and Portfolio Choice

Author

Listed:
  • Harvey S. Rosen

    (Princeton University)

  • Stephen Wu

    (Hamilton College)

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.

Suggested Citation

  • Harvey S. Rosen & Stephen Wu, 2001. "Health Status and Portfolio Choice," Working Papers 127, Princeton University, Department of Economics, Center for Economic Policy Studies..
    • Handle: RePEc:pri:cepsud:75
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    Health and Retirement Study; HRS; United States;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • I19 - Health, Education, and Welfare - - Health - - - Other

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