Health Risk and Portfolio Choice
This article investigates the role of self-perceived risky health in explaining continued reductions in financial risk taking after retirement. If future adverse health shocks threaten to increase the marginal utility of consumption, either by absorbing wealth or by changing the utility function, th...
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| Veröffentlicht in: | Journal of business & economic statistics 2008-10, Vol.26 (4), p.472-485 |
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| container_end_page | 485 |
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| container_issue | 4 |
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| container_title | Journal of business & economic statistics |
| container_volume | 26 |
| creator | Edwards, Ryan D |
| description | This article investigates the role of self-perceived risky health in explaining continued reductions in financial risk taking after retirement. If future adverse health shocks threaten to increase the marginal utility of consumption, either by absorbing wealth or by changing the utility function, then health risk should prompt individuals to lower their exposure to financial risk. I examine individual-level data from the Study of Assets and Health Dynamics Among the Oldest Old (AHEAD), which reveal that risky health prompts safer investment. Elderly singles respond the most to health risk, consistent with a negative cross partial deriving from health shocks that impede home production. Spouses and planned bequests provide some degree of hedging. Risky health may explain 20%% of the age-related decline in financial risk taking after retirement. |
| doi_str_mv | 10.1198/073500107000000287 |
| format | Article |
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If future adverse health shocks threaten to increase the marginal utility of consumption, either by absorbing wealth or by changing the utility function, then health risk should prompt individuals to lower their exposure to financial risk. I examine individual-level data from the Study of Assets and Health Dynamics Among the Oldest Old (AHEAD), which reveal that risky health prompts safer investment. Elderly singles respond the most to health risk, consistent with a negative cross partial deriving from health shocks that impede home production. Spouses and planned bequests provide some degree of hedging. 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If future adverse health shocks threaten to increase the marginal utility of consumption, either by absorbing wealth or by changing the utility function, then health risk should prompt individuals to lower their exposure to financial risk. I examine individual-level data from the Study of Assets and Health Dynamics Among the Oldest Old (AHEAD), which reveal that risky health prompts safer investment. Elderly singles respond the most to health risk, consistent with a negative cross partial deriving from health shocks that impede home production. Spouses and planned bequests provide some degree of hedging. Risky health may explain 20%% of the age-related decline in financial risk taking after retirement.</description><subject>Age</subject><subject>Background risk</subject><subject>Bequests</subject><subject>Consumption</subject><subject>Cross partial derivative</subject><subject>Financial portfolios</subject><subject>Health expenditures</subject><subject>Health insurance</subject><subject>Health risk assessment</subject><subject>Health risks</subject><subject>Health status</subject><subject>Hedging</subject><subject>Investment risk</subject><subject>Investors</subject><subject>Portfolio investments</subject><subject>Precautionary saving</subject><subject>Retirement</subject><subject>Risk aversion</subject><subject>State-dependent utility</subject><subject>Studies</subject><subject>Utility functions</subject><subject>Wealth</subject><issn>0735-0015</issn><issn>1537-2707</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2008</creationdate><recordtype>article</recordtype><recordid>eNp9kE9LxDAQxYMouK5-AUEo3quZpMm0Bw-yqCssKKLnkOYP27XbrEkX2W9v14oXwbnM4f3em-ERcg70CqAqrylyQSlQpN_DSjwgExAcc4YUD8lkD-QDIY7JSUqrPVQKOSHZ3Om2X2YvTXrPdGez5xB7H9omZLNlaIw7JUdet8md_ewpebu_e53N88XTw-PsdpGbAoo-l7ywRntH0SFlprbaVhIKDd6asgYnecUtr9FLW0qAWgj0GoWpa10JyzifkssxdxPDx9alXq3CNnbDScUYZwwQxQCxETIxpBSdV5vYrHXcKaBqX4T6W8RguhhNq9SH-OtgOPxEqRz0m1FvOh_iWn-G2FrV610boo-6M01S_J_8LzMuasQ</recordid><startdate>20081001</startdate><enddate>20081001</enddate><creator>Edwards, Ryan D</creator><general>Taylor & Francis</general><general>American Statistical Association</general><general>Taylor & Francis Ltd</general><scope>AAYXX</scope><scope>CITATION</scope></search><sort><creationdate>20081001</creationdate><title>Health Risk and Portfolio Choice</title><author>Edwards, Ryan D</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c414t-634dcafe07e702cbdad9614a1fdc8b1e6393d3b7f6d8611b557fa75cbba95d233</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2008</creationdate><topic>Age</topic><topic>Background risk</topic><topic>Bequests</topic><topic>Consumption</topic><topic>Cross partial derivative</topic><topic>Financial portfolios</topic><topic>Health expenditures</topic><topic>Health insurance</topic><topic>Health risk assessment</topic><topic>Health risks</topic><topic>Health status</topic><topic>Hedging</topic><topic>Investment risk</topic><topic>Investors</topic><topic>Portfolio investments</topic><topic>Precautionary saving</topic><topic>Retirement</topic><topic>Risk aversion</topic><topic>State-dependent utility</topic><topic>Studies</topic><topic>Utility functions</topic><topic>Wealth</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Edwards, Ryan D</creatorcontrib><collection>CrossRef</collection><jtitle>Journal of business & economic statistics</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Edwards, Ryan D</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>Health Risk and Portfolio Choice</atitle><jtitle>Journal of business & economic statistics</jtitle><date>2008-10-01</date><risdate>2008</risdate><volume>26</volume><issue>4</issue><spage>472</spage><epage>485</epage><pages>472-485</pages><issn>0735-0015</issn><eissn>1537-2707</eissn><abstract>This article investigates the role of self-perceived risky health in explaining continued reductions in financial risk taking after retirement. 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| fulltext | fulltext |
| identifier | ISSN: 0735-0015 |
| ispartof | Journal of business & economic statistics, 2008-10, Vol.26 (4), p.472-485 |
| issn | 0735-0015 1537-2707 |
| language | eng |
| recordid | cdi_crossref_primary_10_1198_073500107000000287 |
| source | JSTOR Mathematics & Statistics; Jstor Complete Legacy |
| subjects | Age Background risk Bequests Consumption Cross partial derivative Financial portfolios Health expenditures Health insurance Health risk assessment Health risks Health status Hedging Investment risk Investors Portfolio investments Precautionary saving Retirement Risk aversion State-dependent utility Studies Utility functions Wealth |
| title | Health Risk and Portfolio Choice |
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