How Does the Stock Market Affect Investor Sentiment? -- Evidence from Antidepressant Usage

Abstract

This study examines the effects of local stock returns on antidepressant usage using the Truven Health MarketScan® individual prescription drug data. There are three main findings. First, a one standard deviation decrease in local stock return increases local investor’s antidepressant usage by approximately 0.42 percent, causing 2,773 more prescriptions filled (a medical expense of approximately 2.3 million dollars) in the subsequent weeks than would have been in the absence of the decrease in stock return; in contrast, a stock price increase has no impact on antidepressant usage. Second, the effect of stock returns on antidepressant usage depends on an array of local socioeconomic characteristics. Third, local stock return fluctuations have significant effects on certain physical illnesses that are comorbidities of depression. The results are consistent across a variety of robustness checks.