Portfolio Choice and Health Status

39 Pages Posted: 30 Jan 2003 Last revised: 2 May 2021

See all articles by Harvey S. Rosen

Harvey S. Rosen

Princeton University - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Stephen Wu

Hamilton College - Economics Department

Date Written: January 2003

Abstract

This paper analyzes the role that health status plays in household portfolio decisions using data from 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 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 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, their planning horizons, or their health insurance status.

Suggested Citation

Rosen, Harvey S. and Wu, Stephen, Portfolio Choice and Health Status (January 2003). NBER Working Paper No. w9453, Available at SSRN: https://ssrn.com/abstract=375305

Harvey S. Rosen (Contact Author)

Princeton University - Department of Economics ( email )

001 Fisher Hall
Princeton, NJ 08544
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

Stephen Wu

Hamilton College - Economics Department ( email )

198 College Hill Road
Clinton, NY 13323
United States

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