Opioid Prescription Rates and Asset Prices — Assessment of Causal Effects

American Finance Association (AFA) 2021 PhD Student Poster

39 Pages Posted: 6 Feb 2020 Last revised: 20 Oct 2021

See all articles by Steven Wei Ho

Steven Wei Ho

Columbia University, Graduate School of Arts and Sciences, Department of Economics

Jiahao Jiang

Columbia University, Graduate School of Arts and Sciences, Department of Economics, Students

Date Written: October 5, 2021

Abstract

We explore the link between county-level opioid prescription rates and asset prices, specifically, stock returns of firms headquartered in that county, as well as real estate prices. In order to establish the causal effects of opioid prescription rates on firm stock returns, we first apply an instrumental variable (IV) regression approach and use the number of clandestine drug laboratories in a county to be the instrumental variable. The results provide robust evidence that county-level opioid prescription rates have a negative causal effect on the equity returns of firms headquartered in that county. And the results are even more pronounced for counties wherein racial minorities make up more than 40% of the county population. Furthermore, we analyze the effect of Medical Board of California's 2014 regulatory revision aimed at reducing controlled substance overdose due to prescriptions and implement a difference-in-differences (DiD) estimation. The DiD estimation results show that this policy change has a positive dynamic effect on Californian firms' equity returns. We also find the opioid prescription reduction assistance program provided by California Health Care Foundation (CHCF) to certain counties in California helps to raise the median prices of existing single-family homes in those counties by $28,678 on average.

Keywords: Urban Economics, Stock Return Predictability, Health Economics and Economic Development, Opioid Prescription Rate, Real Estate Prices, Headquarter Location

JEL Classification: G12, R30, I15

Suggested Citation

Ho, Steven Wei and Jiang, Jiahao, Opioid Prescription Rates and Asset Prices — Assessment of Causal Effects (October 5, 2021). American Finance Association (AFA) 2021 PhD Student Poster, Available at SSRN: https://ssrn.com/abstract=3499348 or http://dx.doi.org/10.2139/ssrn.3499348

Steven Wei Ho (Contact Author)

Columbia University, Graduate School of Arts and Sciences, Department of Economics ( email )

420 W. 118th Street
New York, NY 10027
United States

HOME PAGE: http://econ.columbia.edu/steven-ho

Jiahao Jiang

Columbia University, Graduate School of Arts and Sciences, Department of Economics, Students ( email )

New York, NY
United States

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