PhD seminar with Yevheniia Hrabovska

Title: Health and Portfolio Choice

Abstract: In this project, I revisit the effect of health on portfolio choice. Previous empirical evidence suggests that poor health is associated with lower risky share and lower participation in stock markets. This result is not linked to a particular theoretical mechanism. I suggest examining changes in health along two dimensions: loss of life expectancy and loss of income. The standard life cycle model suggests that the effect on optimal risky share varies depending on which dimension prevails. In the first part of the analysis, I classify ICD-10 diagnoses into 2 types of shock: shock to life expectancy and shock to human capital. In the second part of the analysis, I measure the causal effect of each type of shock on the risky share using the difference-in-difference specification.