A recent research conducted in the United States, ‘Stock Market and the Psychological Health of Investors,’ reveals that bear markets may harm your psychological wellbeing. The research deduces that when the stock market dips, usage of mood-stabilising drugs and counselling sessions tend to rise.
The study further points out that heightened emotional distress is directly proportional to the level of share ownership, notably among individuals aged between 45 and 64, who are more prone to the effects than their younger counterparts. While bear markets often go hand in hand with receding economies, the findings suggest the psychological impact stems primarily from losses in investments rather than the faltering economy.
Owning shares is quite prevalent among Americans, with 58% holding shares and equities constituting 41% of all financial assets owned by households. Surprisingly though, the study indicates that positive returns from stocks don’t lower the usage of mood enchancers.
Attributing this to behavioural finance observations on loss aversion, the authors argue that individuals are predisposed to the impact of losses over benefits. Consequently, the distress of losing money vastly outweighs the pleasure of financial gains.
The study also associates faltering stock prices with negative physical health conditions, including sleeplessness, stomach ulcers and abdominal achings often triggered by depression. Considering that physical ailments can lead to long-term complications, the authors opine that the actual detriment of stock market instability might be undervalued.