The Influence of Mental Health on Portfolio Choice of Older Households.

TitleThe Influence of Mental Health on Portfolio Choice of Older Households.
Publication TypeThesis
Year of Publication2016
AuthorsCheung, CHee
Academic DepartmentFamily Resource Management
UniversityThe Ohio State University
CityColumbus, Ohio
Thesis TypeDissertation
KeywordsDecision making, Mental Health, Older Adults, Portfolios

With an aging population, an increasing number of people including the baby boomers are entering their retirement age. The need for appropriate financial planning for the elderly is an important issue as most of them will need to depend on their retirement savings for expenditures in their retirement. The elderly people’s well-being will hinge on how well they manage their personal finances. Yet there are many challenges facing the older population with respect to personal financial management. One of the most important challenges is that many elderly people have mental health conditions which may affect their ability to manage their household portfolios. This study examines the influences of different kinds of mental health conditions including depression, memory problems, sleep problems and psychiatric problems on household portfolio choice. This study specifically examines two potential significant mechanisms by which mental health conditions might affect household portfolio choice, namely direct influence of mental health on portfolio choice and indirect influence of mental health on portfolio choice through affecting cognitive ability. Based on the theoretical background on the relationship among mental health conditions, cognitive ability and portfolio choice, a model concerning these factors is established. Empirical specifications are built based on health and personal financial management literature. Several research hypotheses are developed to test the direct and indirect influences of mental health conditions on household portfolio choice. Panel regression analyses with fixed effects and mediation models are used to test the hypotheses concerning portfolio decisions in older households in various empirical specifications.Using data from the Health and Retirement Study, this study finds that elderly persons suffering from mental health conditions, including memory problems and depression, have significantly lower cognitive ability than those without these conditions. Fixed effects regressions and mediation models show that memory problems and depression are indirectly associated with a decrease in ownership of risky assets mediated by cognitive ability. Sleep problems, however, are indirectly associated with increase in ownership of risky assets mediated by cognitive ability. On the other hand, sleep problems, memory problems, depression and psychiatric problems are not significantly associated with the proportion of risky assets in the investment portfolios of older households.The results of this study have important policy implications in the area of personal financial management of the elderly. This study establishes the possible mechanism by which mental health conditions influence household portfolio choice. Policy makers may wish to suggest laws to protect elderly people suffering from mental health conditions while they make important investment decisions on their portfolios. One example is to make it mandatory for financial institutions to provide the mentally ill with adequate access to certified… Advisors/Committee Members: Yilmazer, Tansel (Advisor).

Citation Key8990