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From financial wealth shocks to ill-health: allostatic load and overload

Journal: Health Economics

Date: 2023

Author: Declan French

Abstract:
A number of studies have associated financial wealth changes with health-related outcomes arguing that the effect is due to psychological distress and is immediate. In this paper, I examine this relationship for cumulative shocks to the financial wealth of American retirees using the allostatic load model of pathways from stress to poor health. Wealth shocks are identified from Health and Retirement Study reports of stock ownership along with significant negative discontinuities in high-frequency S&P500 index data. I find that a one standard deviation increase in cumulative shocks over two years increases the probability of elevated blood pressure by 9.5%, increases waist circumference by 1.2% and the cholesterol ratio by 6.1% for those whose wealth is all in shares. My findings suggest that the combined effect of random shocks to financial wealth over time is salient for health outcomes. This is consistent with the allostatic load model in which repeated activation of stress responses leads to cumulative wear and tear on the body.

Link: Google Scholar

Background and Context

Research Focus

Study examines how stock market participation impacts the long-term health of American retirees through accumulated stress responses.

Population

Elderly Americans own over quarter of U.S. wealth with over half having stock market investments, making them particularly vulnerable to market fluctuations.

Data Source

Uses Health and Retirement Study data from 2006-2016, collecting biomarker data and physical measures from U.S. population over age 50.

Methodology

Identifies significant stock market falls using S&P500 index data combined with individual stock ownership reports to analyze impact on health measures.

Impact of Stock Market Falls on Blood Pressure Measures

  • Shows how stock market falls affect systolic and diastolic blood pressure for those with stock investments
  • A one standard deviation increase in market falls raises systolic BP by 4.0 mm Hg and diastolic BP by 2.0 mm Hg
  • These changes represent 3.0% and 2.5% increases from mean values respectively

Biomarker Differences Between Stock Holders and Non-Holders

  • Compares key health measures between those who own stocks and those who don't
  • Stock holders generally show better baseline health measures
  • Demonstrates importance of controlling for baseline differences in health status

Cumulative Impact of Market Falls on Health Measures

  • Shows percentage changes in health measures due to market falls
  • Greatest impact seen in blood pressure and cholesterol measures
  • Changes represent significant health risks for cardiovascular disease

Stock Market Activity Over Study Period

  • Shows patterns of market falls and rises during study period
  • Falls averaged 25.4% while rises averaged 17.9%
  • Demonstrates asymmetric nature of market movements

Blood Pressure Classification Changes

  • Shows how market falls affect blood pressure classification probabilities
  • 7.7% decrease in normal blood pressure probability
  • 9.5% increase in elevated blood pressure probability

Contribution and Implications

  • First study to demonstrate long-term health impacts of stock market participation through stress responses
  • Suggests older investors should consider health risks when managing portfolio risk
  • Highlights need for better financial education and diversification strategies for retirees
  • Demonstrates importance of financial intermediaries in managing investment-related stress

Data Sources

  • Blood pressure and biomarker measurements from Table 1 of the article
  • Stock market statistics and cumulative effects from Table 1 and main text
  • Blood pressure classification changes from Table A1
  • Health impact percentages from results section of main text
  • Stock holding statistics from descriptive statistics in Table 1