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Fear in the Stock Market: How COVID-19 Affects Preference for High- and Low-Priced Stocks

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  • Jorge Pena-Marin
  • Rashmi Adaval
  • Liang Shen

Abstract

Does fear create a bias in favor of high-priced stocks? An analysis of the S&P 500 stock prices during the COVID-19 market crash showed that high-priced stocks outperformed low-priced ones (study 1). Experimental data further confirmed that fear induced by thoughts about the pandemic increased individuals’ preference for high-priced stocks when they were forced to choose one stock from a set of alternatives (study 2). Although fear generally decreased the preference for stocks when the market trended downward, this decrease was less for high-priced stocks than for low-priced ones (study 3). Reasons for and implications of this bias are discussed.

Suggested Citation

  • Jorge Pena-Marin & Rashmi Adaval & Liang Shen, 2022. "Fear in the Stock Market: How COVID-19 Affects Preference for High- and Low-Priced Stocks," Journal of the Association for Consumer Research, University of Chicago Press, vol. 7(1), pages 115-123.
    • Handle: RePEc:ucp:jacres:doi:10.1086/711930
    DOI: 10.1086/711930
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