Individual Portfolio Choice When Getting Sick: The Role of Insurance Coverage
31 Pages Posted: 3 Oct 2011
Date Written: August 18, 2011
The effect of a decline in health on individual portfolio choice and the influence of insurance holdings on such asset allocation has been unclear. Using data from working and retired individuals in the Survey of Income and Program Participation between 2001 and 2004, we find that insured individuals are more likely to divest from riskier asset classes after a decline in self-reported health, relative to uninsured cohorts, controlling for income, age, and out-of-pocket medical expenses. Consistent with a domain-general theory of risk, the relationship between poor health and increased aversion to riskier assets is strongest among couples and older households.
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