Deck 4: How Wellness Influences Financial Choices; the Emotional and Moody Investor

Question 1

How does health status influence portfolio choice? Is this a rational decision?

Answer 1

People in poor health typically hold less risky assets such as bonds in their retirement portfolio. This may be a rational decision as it is more likely they will need to gain access to the money sooner, thus rational to not expose the money to excess risk.

Question 2

How does employee health impact firm performance?

Answer 2

Companies located in location with higher obesity rates have lower stock returns, invest less in tangible assets and research and development, have lower sales and asset growth, and have lower profits measured by return on assets. Additionally, companies that have higher employee satisfaction have higher stock returns.

Question 3

How does a person's health impact financial decisions?

Answer 3

Individuals who are more obese or are ill, such as having the flu, tend to take less risk. Additionally, individuals with poor mental health tend to invest in less risky assets and are less likely to have a retirement account.

Question 4

How can financial markets influence a person's health?

Question 5

How do emotions effect risk taking

Question 6

How do emotions effect irrational behavior?

Question 7

What is myopic loss aversion and how does it relate to emotions?

Question 8

How do researchers examine the mood of the aggregate stock market?