The Psychological Health of Investors and Stock Market Linked, Study Finds
A recent study conducted by two Ball State University faculty members has shed light on a significant correlation between local stock market downturns and an increase in antidepressant use among investors. The research, titled “Stock Market and the Psychological Health of Investors,” was co-authored by Dr. Chang Liu, assistant professor of finance, and Dr. Maoyong Fan, professor of economics, and was recently published in The Financial Review.
The study utilized a national individual-level medical dataset and focused on the home bias in investment. The researchers found that there is a clear and robust link between investment losses and the psychological well-being of investors, independent of local economic conditions. Dr. Liu emphasized that the financial stress resulting from stock market declines not only impacts mental health but can also lead to physical health issues such as insomnia and depression.
Furthermore, the study revealed that the effect of stock market downturns on antidepressant usage intensifies in areas with higher per capita dividend income, indicating a direct relationship between stock ownership and psychological responses. The researchers also noted that positive stock returns do not influence antidepressant usage, supporting the loss aversion hypothesis.
In light of these findings, Dr. Fan emphasized the importance of proactive support and education for investors during times of market turbulence. The study advocates for the inclusion of mental health resources in financial advising and highlights the need for policy and education actions to mitigate mental health risks associated with stock market participation.
Overall, the research underscores the broader societal consequences of stock market volatilities on mental health and calls for a holistic approach to investor well-being. As investors navigate market changes, it is crucial for them to be prepared emotionally and financially, ensuring they have the necessary support and resources to cope with the psychological impact of investment losses.
The study’s findings provide valuable insights for both investors and policymakers, emphasizing the importance of addressing mental health concerns in the context of financial decision-making. By understanding the psychological implications of stock market fluctuations, investors can better navigate market uncertainties and safeguard their well-being in the face of economic challenges.
