The Effect of Health and Mortality on Portfolio Choice
57 Pages Posted: 11 Feb 2020 Last revised: 23 Mar 2020
Date Written: March 20, 2020
We analyze portfolio choices of 70,000 households over a period where one in the family gets cancer. We find that a cancer diagnosis reduces risk-taking along the extensive margin. In contrast, having personal experience with cancer many years ago is not associated with the current portfolio choice. Fatal cancers change family composition. Widowhood increases the probability of a stock market exit for the widowed individual by a factor of 16 relative to non-fatal cancers. In line with theory, the relationship between widowhood and subsequent portfolio choice depends on the relative importance of the deceased's human capital.
Keywords: portfolio choice, health shocks, cancer
JEL Classification: D14, G11
Suggested Citation: Suggested Citation