Why transplant surgeons should like bear markets
Ok, if you think that death is such a serious matter that one shouldn’t talk about the upside of personal tragedy, you might want to sit this one out. Remember that Friday posts are humorous, quirky, or strange and not to be taken too seriously. You have been warned.
I knew a surgeon once who did a lot of organ transplants and he told me that the medics who work with organ donations knew that when it suddenly started to rain on a summer weekend, it would be a “good” day for their patients. The reason is that on a summer weekend there are a lot of motorcycles on the road and when it suddenly starts to rain, motorcyclists would inevitably get involved in fatal crashes which meant that there were more organs to harvest that could be transplanted to patients in need of a new one.
It seems that surgeons and patients waiting for new organs should be thankful for stock market crashes as well.
We all heard these stories about people committing suicide after the 1929 stock market crash. Obviously, these are exceptional cases, but everyone who works in finance knows that a severe stock market decline can lead to a lot of stress and anxiety both with finance professionals and retail investors who see their savings plummet as the stock market craters.
And where there is stress, there is a heightened risk for strokes and heart attacks. Below is a calculation of abnormal deaths in the days after the stock market crash of 19 October 1987 as shown in the new paper of Spencer Barnes.
Abnormal deaths in the days after the 1987 stock market crash
Source: Barnes (2020).
The size of excess deaths is enormous. But it wasn’t just in the extreme event of October 1987. Barnes calculated excess deaths based on official records for organ donations in the United States between 1987 and 2018 and he found that a one standard deviation decline in stock market returns (so about 1 percentage point below the average daily return) leads to an average increase in the death of organ donors of 0.67%. That doesn’t sound like much, but that is the same as c. 32 additional deaths by people who have been registered as organ donors in the United States. And because they are donors of several organs (heart, liver, kidney, you name it) this means that there are somewhere between 98 and 116 additional organ transplants performed each year in the United States. Imagine the numbers of patients that were saved by the rapid decline in stock markets in March 2020 when on 12 March 2020, the S&P 500 fell 9.5% in one day – its second-largest one-day drop in history and about half of the 1987 drop. Most likely, quite a few people can thank that day for a second chance at life. And the next time you feel the pain of losing a lot of money in the stock market, you may be able to console yourself with this thought.