Cancer and Portfolio Choice: Evidence from Norwegian Register Data

Abstract

We examine the personal investment decisions of 60,000 households following a cancer diagnosis. To create a control group that minimizes the likelihood that the results are confounded by lifestyle factors, we rely on households diagnosed with the same diagnosis but a few years later. Our estimates show that a cancer diagnosis reduces households’ willingness to take risks with their financial wealth. We use the vast heterogeneity among cancers regarding its impact on life expectancy and income to analyze through which channels cancer impact risk-taking. We find that cancers that have a greater impact on life expectancy and income cause a larger reduction in risk-taking. These two channels account for about 40 to 90 percent of the estimated effects of cancer on personal investment decisions. We do not find any association between having dealt with cancer many years ago and current portfolio choices.

Keywords: portfolio choice, health shocks, cancer

JEL Classification: D14, G11