Sanity And The Stock Market « The Dish

Sanity And The Stock Market « The Dish

For a recent study, researchers in Taiwan examined the data of 469,000 patients who had been hospitalised with mental disorders, then “parsed those admissions against changes in the broad-based Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX)”:

The study found that a 1,000-point fall in the TAIEX (about two-thirds of its standard deviation) caused a daily increase of 4.71% in hospitalisations for mental disorders. Relatively routine stockmarket declines also had an impact: a 1% daily fall in the market raised the number of admissions by 0.36% on that day. Consecutive daily declines, regardless of size, led to cumulative increases in such hospitalisation: 0.32% for each additional day. So when share prices fell for five consecutive trading days, the fifth day saw a 1.6% increase in hospitalisations for mental disorders—a relentlessly falling stockmarket clearly has a mounting impact on psychological wellbeing. The study also notes that, on average, hospitalisations were 200% higher on trading days than on non-trading days.

Although falling stock prices influenced men, women and all adult age groups to some degree, the researchers found that the mental health of men and the middle-aged were most severely affected. A possible explanation comes from previous studies, which found that men invest in the stockmarket far more actively than women; are more inclined to relate their own competence to management of their finances; and take greater risks. Middle-aged investors, by contrast, have fewer future opportunities to recover their losses, making stockmarket declines more threatening to their mental wellbeing. And, as the study notes, age itself is an important risk factor for mental health.

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Sanity And The Stock Market « The Dish

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