Stocks are the most popular of the so-called “risk” assets, in contrast with safe haven investments like bonds and gold. But the risk of investing in them isn’t limited to your bank balance or your retirement savings. It may also affect your mental well-being.
At least, that’s the conclusion of a study by University of California at San Diego academics, first cited by Bloomberg. The study looked at hospitalizations in California between 1983 and 2011 and found “a strong inverse link” between daily stock returns and hospital admissions, particularly for psychological conditions like anxiety, panic disorders and major depression.
A one-day decline in the stock market of roughly 1.5%, the study found, is associated with a rise in hospital admissions in California over the next two days of about 0.26%. The study estimates that “market-induced hospitalizations” could increase the cost of health care in California by as much as $77 million a year. Extrapolated across the entire United States, that works out to $650 million a year.
Experts in behavioral finance have learned a lot in recent years about how our moods affect the market; this study speaks more to how the market may impact our moods. As the US struggles with an absurdly expensive healthcare system, it’s another reason to worry about the fallout of a frothy stock market’s decline.
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