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Why Was There More Household Stock Market Participation During the COVID-19 Pandemic?

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  • Zheng, Wenyuan
  • Li, Bingqing
  • Huang, Zhiyong
  • Chen, Lu

Abstract

Although the nation was experiencing an economic downturn due to the COVID-19 pandemic outbreak, we nonetheless observed an increase in household equity share value relative to both domestic market capitalization and retail investors’ trading volume. In this paper, we aim to interpret the reasons underlying this seemingly unexpected phenomenon. We investigate portfolio choices with stocks, bonds, and life annuities under an inverse S-shaped probability distortion function. The results indicate that people invest more heavily in risky assets and buy more annuities when reducing their savings in risk-free accounts, which is indeed consistent with the reality.

Suggested Citation

  • Zheng, Wenyuan & Li, Bingqing & Huang, Zhiyong & Chen, Lu, 2022. "Why Was There More Household Stock Market Participation During the COVID-19 Pandemic?," Finance Research Letters, Elsevier, vol. 46(PB).
    • Handle: RePEc:eee:finlet:v:46:y:2022:i:pb:s154461232100458x
    DOI: 10.1016/j.frl.2021.102481
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    Cited by:

    1. Boubaker, Sabri & Goodell, John W. & Kumar, Satish & Sureka, Riya, 2023. "COVID-19 and finance scholarship: A systematic and bibliometric analysis," International Review of Financial Analysis, Elsevier, vol. 85(C).

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    More about this item

    Keywords

    COVID-19 pandemic; Household equity value; Two-sided skewness; Inverse S-shaped probability distortion function; Portfolio choice problem;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G50 - Financial Economics - - Household Finance - - - General

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