Finance Financial

Do negative wealth shocks impact your health?

The answer is ‘yes’ according to a paper by French (2023):. The authors use data from the Health and Retirement Study (HRS) as well as high-frequency returns data for the S&P 500. The study finds that:

…a one standard deviation increase in cumulative [negative wealth] 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.

The full study is available here.