Health and (Other) Asset Holdings

81 Pages Posted: 12 Jun 2009 Last revised: 9 Jun 2015

See all articles by Julien Hugonnier

Julien Hugonnier

Swiss Federal Institute of Technology Lausanne - Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute

Florian Pelgrin

EDHEC Business School; EDHEC Business School

Pascal St-Amour

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne); Swiss Finance Institute

Date Written: October 25, 2012

Abstract

Despite clear evidence of correlations between financial and medical statuses and decisions, most models treat financial and health-related choices separately. This paper bridges this gap by proposing a tractable dynamic framework for the joint determination of optimal consumption, portfolio holdings, health investment and health insurance. We solve for the optimal rules in closed form and capitalize on this tractability to gain a better understanding of the conditions under which separation between financial and health-related decisions is sensible, and of the pathways through which wealth and health determine allocations, welfare and other variables of interest such as expected longevity or the value of health. Furthermore we show that the model is consistent with the observed patterns of individual allocations and provide realistic estimates of the parameters that confirm the relevance of all the main characteristics of the model.

Keywords: portfolio, health investment, mortality risk

JEL Classification: G11, I12

Suggested Citation

Hugonnier, Julien and Pelgrin, Florian and St-Amour, Pascal, Health and (Other) Asset Holdings (October 25, 2012). Swiss Finance Institute Research Paper No. 09-18. Available at SSRN: https://ssrn.com/abstract=1417364 or http://dx.doi.org/10.2139/ssrn.1417364

Julien Hugonnier (Contact Author)

Swiss Federal Institute of Technology Lausanne - Ecole Polytechnique Fédérale de Lausanne ( email )

Quartier UNIL Dorigny
Extranef
Lausanne, CH-1015
Switzerland

HOME PAGE: http://sfi.epfl.ch/hugonnier

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Florian Pelgrin

EDHEC Business School ( email )

France
Switzerland

EDHEC Business School ( email )

58 rue du Port
Lille, 59046
France

Pascal St-Amour

University of Lausanne - School of Economics and Business Administration (HEC-Lausanne) ( email )

Unil Dorigny, Batiment Internef
Lausanne, 1015
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

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