The Impact of the Stock Market Crash of 2008-2009 on the Wealth of U.S. Households

Journal of Financial Planning, 29 (2), 52-58

25 Pages Posted: 12 Jan 2016 Last revised: 9 Jul 2019

See all articles by Kyoung Tae Kim

Kyoung Tae Kim

University of Alabama

Sherman D. Hanna

Ohio State University (OSU)

Date Written: January 10, 2016

Abstract

1. This research examines the potential impact of the stock market crash of 2008-2009 on U.S. working households. The Great Recession caused financial problems for many households in terms of unemployment, business losses, and decreases in real estate values, but the broadly based decreases in stock indexes impacted households in all areas of the United States.

2. Among households age 30 to 70 with a head employed full-time, the ratio of equity assets to total wealth (net worth plus human wealth) had a mean value of 4.2%.

3. The decreases in stock market indexes between 2007 and 2009 had substantial impacts on the wealth of only a small proportion of working households, with a mean potential loss in wealth due to stock market decreases of only 1.3%.

4. The relative impact of the stock market declines was highest for the oldest working households, but the mean potential loss in wealth for that group was only 1.9%, and only 5% of households in that age range had a potential loss of 8.0% or more of wealth.

5. By framing the potential wealth loss from severe stock market decrease as a percent of wealth including human wealth, financial advisors can add another perspective to assist clients in thinking rationally about portfolio choices.

Keywords: Stock market crash, Total wealth, Wealth shock

JEL Classification: D14, D91, E21, E32, G11

Suggested Citation

Kim, Kyoung Tae and Hanna, Sherman D., The Impact of the Stock Market Crash of 2008-2009 on the Wealth of U.S. Households (January 10, 2016). Journal of Financial Planning, 29 (2), 52-58. Available at SSRN: https://ssrn.com/abstract=2713536

Kyoung Tae Kim (Contact Author)

University of Alabama ( email )

312 Adams Hall
Tuscaloosa, AL 35487-0001
United States

Sherman D. Hanna

Ohio State University (OSU) ( email )

1787 Neil Avenue
Campbell 265D
Columbus, OH 43210
United States
614-292-4584 (Phone)

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