Jan. 7, 2014 -- A stock market slide can send you to the hospital. That's the finding of a new study by two U.C. San Diego finance professors who correlated 30 years of California hospital admission records with the ups and downs of the stock market.
"Worrying About the Stock Market: Evidence from Hospital Admissions," by professors Joseph Engelberg and Christopher Parsons, was recently presented at the annual meeting of the American Economic Association. The authors have submitted it for peer review to the Journal of Finance, where they hope to see it published six months from now.
The analysis, drawing upon admissions records for every hospital in California from 1983 to 2011, finds a nearly instantaneous increase in hospital admissions following stock market drops, especially by persons complaining of anxiety, depression or other conditions of mental or emotional stress.
California's hospital admissions spiked more than 5 percent on "Black Monday"—Oct. 19, 1987--when the market plunged nearly 25 percent. Reviewing all three decades' of data, the authors concluded that "one standard deviation drop in U.S. stock prices (roughly -1.5 percent) increases admissions to California hospitals by about 0.26 percent over the next two days."
If the focus is limited to people complaining of anxiety or panic attacks, the increase in admissions is twice as great, they write.
On average, more than 11,000 Californians are hospitalized each day, according to the state's Office of Statewide Health Planning and Development.
A separate and unrelated study of 11,590 North Carolina hospital patients by Duke University, published in the American Journal of Cardiology in 2010, found the stock market crash of 2008 to be associated with a spike in the rate of heart attacks.
Engelberg and Parsons' most significant finding, they write, was the immediacy of reaction: "Stock market declines today result in psychological distress today."
Parsons tells ABC News he was surprised by the severity of the distress: "If you'd have asked me before we did the study, are people upset when they lose money? I'd have said, yes, of course they are. But the response is more dramatic than that. Think how anxious you have yourself admitted to the hospital."
Parsons acknowledges it isn't possible to prove causality between stock drops and increases in hospital admissions. He doesn't know how many patients in the study owned stock. And he allows that other unsettling events—earthquakes, say, or terrorist attacks--can be correlated with an increase in hospital admissions. But looking over all three decades of hospital data, he says, he and his co-author could find no more consistent and immediate correlation than with stock market performance.
Parsons says his inspiration for the study came in part from observing his own father. "The first thing my dad does every morning, after he's made his coffee, is follow the market for three hours. If it's doing well, he'll be in a good mood. If it's not, he gets very nervous. He'll call me to ask what I think he should do." Parsons says his dad seldom does anything, regarding his investments; but his mood affects his other decisions—whether to play golf, say, or go out to dinner.
"He's never worried himself so sick that he's checked himself into the hospital. I think what we're picking up here, in our study, are people who are perhaps more sensitive to stress." For such a person, a market drop could be "the straw that breaks the camel's back."
Parsons notes that a person having so dramatic a reaction to a market plunge might not own stock. His or her stress could arise from worry about the effect of a plunge on the economy at large, or from fear of a resulting job loss.
How big might be the health care cost associated with stock market declines? The authors' calculation, which they call "back-of-the-envelope," assumes 3,700 "market-induced" hospitalizations a year in California. They cite a 2009 U.S. Census Bureau estimate that the average hospitalization, nationally, costs roughly $21,000, putting the cost to California at about $77 million a year. They extrapolate from that to estimate a cost of $650 million to the nation as a whole.