Health and Households’ Portfolio Choices in Europe

Using the Survey of Health, Ageing, and Retirement in Europe (SHARE), this study investigated how health is associated with households’ portfolio choices in 10 European countries. This study reports three important findings on the relationship between health and portfolio choices. First, households in poor health condition are less likely than households in good health to own various types of financial and non-financial assets. Second, households in poor health condition tend to allocate a lower share of their wealth to risky financial assets, savings for long-term investment, their principal residence, and other non-financial assets while they allocate a larger share to liquid assets such as bank deposits. Third, there exists a regional variation in the magnitude of the correlation between health and portfolio choices. This regional variation can be explained by differences in health care systems. Overall, these findings suggest that negative health shocks are significantly associated with a household’s portfolio choices.