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Investment behavior of retail investors in response to COVID-19 economic impact payments

Author

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  • Jung, Woosung
  • Kim, Donghyun
  • Sul, Hong Kee

Abstract

This study investigates the impact of Economic Impact Payments (EIPs) on retail stock trading and the stock market using Robinhood data. We find that during the EIP period, there was a surge in retail investors who adopted a contrarian strategy by purchasing stocks that experienced significant declines due to COVID-19. However, these stocks relatively underperformed over the following six months, suggesting potential biases in retail investment decisions. Furthermore, a decrease in market quality was observed in these stocks.

Suggested Citation

  • Jung, Woosung & Kim, Donghyun & Sul, Hong Kee, 2023. "Investment behavior of retail investors in response to COVID-19 economic impact payments," Economics Letters, Elsevier, vol. 233(C).
    • Handle: RePEc:eee:ecolet:v:233:y:2023:i:c:s0165176523003956
    DOI: 10.1016/j.econlet.2023.111370
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    More about this item

    Keywords

    Individual investors; Economic stimulus; Robinhood;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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