Decline In Wealth Research Articles

Health accidents and wealth decline in old age

This paper explores the impact of a health shock and changes in survival probability on the savings and portfolio choices of older individuals. Using a theoretical framework featuring a portfolio choice that incorporates imperfect annuity markets, we analyse how elderly individuals, whose survival probability has been altered by a health shock, allocate their resources.A difference-in-differences approach complements the theoretical approach by taking into account the effect of age and cohort, and controlling for selection bias related to health events at older ages. Our analysis utilizes a panel of 5570 observations from the Survey of Health, Aging, and Retirement in Europe (Shavelle et al., 2019;2017). Both theoretical and empirical findings converge, indicating that experiencing a health accident such as a stroke or heart attack leads to a decrease in safe savings. Consequently, investing in annuities becomes crucial in enabling individuals to mitigate the consequences of poor health in aging economies.

Changes in the DJIA: market reactions and economic cycles

PurposeThe purpose of this study is to explain the mixed results to changes in the DJIA index documented in the literature. The authors show that economic cycles, especially recessionary periods, explain the difference in findings.Design/methodology/approachThe authors examine changes in the Dow Jones Industrial Average (DJIA) from 1929 to 2019 to evaluate immediate and long-term market reactions after a component change. Using multiple event-study methodologies, the authors examine the full era, the pre- and post-exchange traded fund (ETF) windows and economic cycles using both pre and post-estimation windows.FindingsIn aggregate, DJIA additions do not present an increase in wealth; however, wealth effects are positive during expansions and negative during recessions. Deletions have a negative wealth effect. The authors find weak evidence of an indexing effect. Additions are positive post-1998, and deletions remain negative regardless of era. In the long run, firms added to the DJIA have positive abnormal returns in the second year after inclusion. Deletions in recessionary times have negative returns three years after removal, a signal of longer-term wealth decline for these firms.Research limitations/implicationsThe DJIA changes periodically to better represent industries relevant to the blue-chip market, and the findings have implications for fund managers and active investors.Practical implicationsThe DJIA changes periodically to better represent industries relevant to the blue-chip market, and the findings have implications for fund managers and active investors.Originality/valuePrior literature presents limited time series of data points and mixed results and implications. The authors find that the economic cycle is a driving factor that supports predicted signs and amounts of wealth change. Furthermore, the authors see limited ETF impact on DJIA changes and some impact of the choice of estimation period.

Hegemonic Masculinity and Mental Health Among Older White Men in the U.S.: The Role of Health and Wealth Decline

Hegemonic Masculinity and Mental Health Among Older White Men in the U.S.: The Role of Health and Wealth Decline

Role of Financial Managers in Post Corona Business

The phenomenon of the financial crisis is an issue that itself is the consequence and effect of the economic misconduct of the world’s monetary powers is along with a severe recession in stock markets, oil prices falling, declining industrial production, the bankruptcy of banks and large industrial enterprises, and finally, in a word, it is accompanied by a sharp decline in economic growth and ultimately economic instability, in a word, a Severe decline sharp decline in wealth and unemployment, and intense decline in Economic growth and, ultimately, economic instability. A clear example of this damage and turmoil can be seen in the crisis caused by the outbreak of the Coronavirus, which has caused severe damage to the global economy and business .Meanwhile, companies and institutions became convinced of the importance of finance and its efficient management. There is no doubt that the success and recovery from this crisis of all businesses depend on the CFO and their key tasks. It becomes even more important in many small and large companies that do not have the ability to check their accounts and books and are unable to pay debts and settle and accounts, in addition to being one of the main needs of start-ups to continue his activity and life Rescue from the dire financial situation one after another has made the role of financial manager more prominent. As the emergence of financial crises caused by the coronavirus in general in the world has shifted all its attention and reliance on financial managers and their vital role the need to take measures to prevent and deal with the crisis by consultants and financial managers. As the of financial crises caused by the coronavirus the world in general, all the attention and reliance on financial managers and their vital role has become more prominent, the need for measures to prevent and deal with the crisis by financial advisers and managers he does. As the emergence of financial crises caused by the corona virus in general around the world has shifted all its attention and reliance on financial managers and their vital role. It necessitates the adoption of measures to prevent and deal with the crisis by financial advisers and managers. Therefore, considering this issue, the need to study the crisis and the role of financial managers in overcoming financial crises becomes more apparent. Therefore, in this review and library article, first a definition of financial crisis is presented and then the role of financial managers in post-corona business is studied and examined.

Marital experiences and depressive symptoms among older adults in rural South Africa

This paper advances the understanding of how marital transitions may influence mental health by investigating these associations among a population of rural, Black South Africans aged 40+ that was directly impacted by apartheid. Using two waves of data from 4,176 men and women in Health and Aging in Africa: A Longitudinal Study of an INDEPTH Community in South Africa (HAALSI), we investigated associations between marital experiences and depressive symptoms, by gender, and explored whether economic resources is a moderator of these associations. We found that experiencing a marital dissolution was associated with more depressive symptoms than remaining married for both men and women. We also found that men, but not women, report greater depressive symptoms if they remained separated/divorced, remained widowed, or remained never married between waves. We found no evidence that a decline in wealth moderated the impact of marital dissolution on depressive symptoms for women or men. These findings suggest that the documented benefits of marriage for mental health, and differences by gender in those benefits, may extend to older, rural South Africans, despite the unique experiences of this population.

On the Creation and Destruction of National Wealth: Are Financial Collapses Endogenous?

This paper traces US national wealth from 1914 through 2015 and constructs a multivariate econometric model that combines elements of short-term and long-term dynamics. We find that US wealth depends on a range of macroeconomic variables, including the wealth itself observed in the previous period, change in market capitalization, change in US house price index and inflation. Less impactful, statistically significant factors included unemployment, changes in oil price, and change in debt-to-GDP ratio. Another significant result is that the Glass–Steagall Act, which prohibited commercial banks from speculative activity in the stock market after 1933, had a statistically significant positive impact on wealth in the US. We test the model by asking whether it could have anticipated the actual collapse in 2008, given prior data up to 2000, 2005 and 2010. All three tests forecasted a sharp wealth decline starting in 2008, followed by a recovery. These results suggest the possibility of forecasting future financial collapses. We have found our model to be slightly more accurate in the short run than in the long run.

Accounting for selection bias due to death in estimating the effect of wealth shock on cognition for the Health and Retirement Study.

The Health and Retirement Study (HRS) is a longitudinal study of U.S. adults enrolled at age 50 and older. We were interested in investigating the effect of a sudden large decline in wealth on the cognitive ability of subjects measured using a dataset provided composite score. However, our analysis was complicated by the lack of randomization, time-dependent confounding, and a substantial fraction of the sample and population will die during follow-up leading to some of our outcomes being censored. The common method to handle this type of problem is marginal structural models (MSM). Although MSM produces valid estimates, this may not be the most appropriate method to reflect a useful real-world situation because MSM upweights subjects who are more likely to die to obtain a hypothetical population that over time, resembles that would have been obtained in the absence of death. A more refined and practical framework, principal stratification (PS), would be to restrict analysis to the strata of the population that would survive regardless of negative wealth shock experience. In this work, we propose a new algorithm for the estimation of the treatment effect under PS by imputing the counterfactual survival status and outcomes. Simulation studies suggest that our algorithm works well in various scenarios. We found no evidence that a negative wealth shock experience would affect the cognitive score of HRS subjects.

Funding Constraints and Informational Efficiency

Abstract We analyze a tractable rational expectations equilibrium model with margin constraints. We argue that constraints affect and are affected by informational efficiency, leading to a novel amplification mechanism. A decline in wealth tightens constraints and reduces investors’ incentive to acquire information, lowering price informativeness. Lower informativeness, in turn, increases the risk borne by financiers who fund trades, leading them to further tighten constraints faced by investors. This information spiral leads to (a) significant increases in risk premium and return volatility in crises, when investors wealth declines, (b) complementarities in information acquisition in crises, and (c) complementarities in margin requirements.

A methodology to analyze local housing wealth divergences in an aging shock context: application to the case of France

ABSTRACT Assuming a life cycle perspective and using the link between demography and house prices, this article proposes a new approach to analyze the spatial reshaping of housing wealth caused by the elder boom. The modification in housing wealth circulation across generations is also a spatial modification that carries consequences for local territories. Applied to the French case at the departmental level, this methodology is also relevant for European countries confronted to an aging shock. We find that although the losses are amplified for some departments, others benefit from this aging shock. Metropolization is insurance against important housing wealth losses, whereas for the nonmetropolitan departments, a combination of second-order factors is required to avoid wealth decline. Our results suggest that these evolutions are mainly structural and that the cyclical variables are of secondary importance. Compensation, by positive cyclical trend, for structural decline is not a circumstance that currently occurs in the French case. Social classes also appear to be strongly related to this change, in which various spatial inequalities are reinforced. As for the unemployment rate, this indicator poorly reflects the shift and may be misleading for a regional planning policy.

Optimal saving and health prevention

This paper examines contemporaneous choices of saving and health prevention under a two-argument utility of wealth and health. Unlike the traditional approach to modelling the cost of prevention as a decline in wealth, health prevention here is assumed to mainly reduce current health level in exchange for a lower probability of contracting a disease in the future. We show that the optimal levels of the two instruments of risk management can move either in the same direction or in opposite directions. One key element in distinguishing these two cases is whether a decision maker is correlation averse or correlation prone. Together with the relative importance of substitution effect over income effect on saving, the sign of correlation attitude is also relevant in determining the reaction of optimal saving and health prevention when the interest rate changes. Lastly, several combinations of preferences in different aspects are provided, which lead to unambiguous effects of a background risk in wealth on the two optimal choices.

Economic Growth and Sustainable Development in Indonesia: An Assessment

We explore the nexus between sustainability and economic growth in Indonesia between 1990 and 2014, using an inclusive wealth framework that covers the country’s unique resources and biodiversity. Indonesia’s inclusive wealth growth is considered positive. However, the ‘dilution effect’ on Indonesia’s population has outpaced the country’s wealth growth, so that its per capita inclusive wealth growth has been negative. This study implies that the GDP per capita growth in Indonesia does not necessarily indicate sustainability. The depreciation of both renewable and non-renewable natural capital is driving the decline in wealth per capita. Despite this, sustainability has been improving, although marginally, due to increases in the rates of produced and human capital growth. To return to a sustainable growth path, Indonesia must increase its investments to a net gain in the rate of wealth growth, and it must reduce its resource extraction to levels that its productive base can maintain.

The lost generation of the Great Recession

This paper analyzes the effects of the Great Recession on different generations. While older generations suffered the largest decline in wealth due to the collapse in asset prices, younger generations suffered the largest decline in labor income. Potentially, some households may have benefited from the purchase of cheaper assets. To analyze the impact of these channels, I construct an overlapping-generations model with borrowing constraints in which households choose a portfolio of risky and risk-free assets. In response to shocks to labor income and asset markets resembling the Great Recession, young risky asset holders suffer the largest welfare losses, equivalent to a 33 percent reduction in one-period consumption.

Habits and Leverage

Many stylized facts of leverage, trading, and asset prices follow from a frictionless general equilibrium model that features agents' heterogeneity in endowments and habit preferences. Our model predicts that aggregate debt increases in good times when stock prices are high, return volatility is low, and levered agents enjoy a consumption boom. Our model is consistent with poorer agents borrowing more and with recent evidence on intermediaries' leverage being a priced factor of asset returns. In crisis times, levered agents strongly deleverage by fire selling their risky assets as asset prices drop. Yet, consistently with the data, their debt-to-wealth ratios increase because their wealth decline faster due to higher discount rates.

Habits and Leverage

Many stylized facts of leverage, trading, and asset prices follow from a frictionless general equilibrium model that features agents’ heterogeneity in endowments and habit preferences. Our model predicts that aggregate debt increases in good times when stock prices are high, return volatility is low, and levered agents enjoy a “consumption boom.” Our model is consistent with poorer agents borrowing more and with recent evidence on intermediaries’ leverage being a priced factor of asset returns. In crisis times, levered agents strongly deleverage by “fire selling” their risky assets as asset prices drop. Yet, consistently with the data, their debt-to-wealth ratios increase because their wealth decline faster due to higher discount rates.

Using inclusive wealth for policy evaluation: Application to electricity infrastructure planning in oil-exporting countries

Decision-makers often seek to design policies that support sustainable development. Prospective evaluations of how effectively such policies are likely to meet sustainability goals have nonetheless remained challenging. Evaluating policies against sustainability goals can be facilitated through the inclusive wealth framework, which characterizes development in terms of the value to society of its underlying capital assets, and defines development to be potentially sustainable if that value does not decline over time. The inclusive wealth approach has been developed at a theoretical level and applied to retrospective evaluations. Here, we apply inclusive wealth theory to prospective policy evaluation coupled with dynamic simulation modeling, using a case of electricity infrastructure policies in oil-exporting countries. To demonstrate the prospective evaluation, we analyze investment policies in non-fossil electricity capacity in terms of their forecast impact on several dimensions of inclusive wealth. Illustrative results show that investing in non-fossil capacity in Saudi Arabia and Kuwait can increase components of the countries' inclusive wealth, though the impacts depend on future uncertainties. In contrast, comparable components of the UAE's net inclusive wealth decline under similar investment policies. Finally, including human capital improvements in estimates of inclusive wealth substantially increases its value, though the amount varies across the countries.

The Lost Generation of the Great Recession

This paper analyzes the effects of the Great Recession on different generations. While older generations suffered the largest decline in wealth due to the collapse in asset prices, younger generations suffered the largest decline in labor income. Potentially, the young may benefit from the purchase of cheaper assets, especially if they have access to credit. To analyze the impact of these channels, I construct an overlapping-generations model with borrowing constraints in which households choose a portfolio of risky and risk-free assets. Shocks to labor income and uncertainty regarding the return on risky assets generate a recession with a drop in asset prices and cross-sectional changes in risky investment consistent with the recent Recession. Overall, the young suffer the largest welfare losses, equivalent to a 7 percent reduction in lifetime consumption.

Self-organization and phase transition in financial markets with multiple choices

Market confidence is essential for successful investing. By incorporating multi-market into the evolutionary minority game, we investigate the effects of investor beliefs on the evolution of collective behaviors and asset prices. It is found that the roles of market confidence are closely related to whether or not there exists another market. When there exists another investment opportunity, different market confidence may lead to the same price fluctuations and the same investment attainment. There are two feedback effects. Being overly optimistic about a particular asset makes an investor become insensitive to losses. A delayed strategy adjustment leads to a decline in wealth and one’s runaway from the market. The withdrawal of the agents results in the optimization of the strategy distributions and an increase in wealth. Being overly pessimistic about a particular asset makes an investor over-sensitive to losses. One’s too frequent strategy adjustment leads to a decline in wealth. The withdrawal of the agents results in the improvement of the market environment and an increase in wealth.

Why Did Young Families Lose So Much Wealth During the Crisis? The Role of Homeownership

The authors use the Federal Reserve’s Survey of Consumer Finances to document a boom in home ownership and mortgage borrowing among young families in the years leading up to the recent financial crisis. Many young families lost more of their wealth during the downturn than middle-aged and older families. The authors find that about three-quarters of the decline in the average young family’s wealth between 2007 and 2010 was due to its exposure to residential real estate. For middle-aged and older families, housing losses contributed about 53 percent and 40 percent of the total decline in wealth, respectively. Regression evidence suggests that young families’ wealth, on average, was unusually highly concentrated in housing and these families’ debt burdens were extremely high at the peak of the boom. (JEL D14, D31)

The Financial Crisis from the Family's Perspective: Evidence from the 2007–2009 SCF Panel*

This paper examines changes in families' finances as captured in the 2007–2009 Survey of Consumer Finances panel. The broad contours of changes in families' assets, debts, and wealth align with changes in the corresponding aggregate measures, but the microdata from the panel highlight substantial variation in families' experiences between 2007 and 2009. Although more than 60% of families saw their wealth decline over the two‐year period, a sizable fraction experienced gains in wealth, while some families' financial situations saw little change on net. The shifts in wealth do not appear to be correlated in a simple way with families' characteristics. Instead, the patterns of mixed losses, gains, and modest shifts in wealth generally hold within groups defined by demographic characteristics or by 2007 wealth or income. On the whole, changes in wealth appear to stem from changes in asset values rather than from changes in portfolio composition or debt levels.

The Performance of Currency Value-Adjusted Stock Indices

Indices aggregate the price and return performance of stocks to provide summary measures. The local currency represents the underlying index basis. Variations in the underlying currency value distort indices and can lead to interpretation errors. A 1% decline in an index accompanied by a 2% increase in the underlying currency value implies the investor has a wealth gain. An investor observing the index level in isolation would interpret the data as indicating a wealth decline. This article develops new stock indices that control for the effects of dollar value fluctuations. Globalization and recent instability in currency values highlight the importance of this work.