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Financial well-being, COVID-19, and the financial better-than-average-effect

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  • Barrafrem, Kinga
  • Västfjäll, Daniel
  • Tinghög, Gustav

Abstract

At the onset of the COVID-19 outbreak we conducted two surveys in the United Kingdom and Sweden (N=2021) regarding how people assess the near future economic situation within their household, nation, and the world. Together with psychological factors related to information processing we link these prospects to financial well-being. We find that, although generally very pessimistic, a substantial proportion of individuals believes that their households’ economy will be doing substantially better than the national and global economy, suggesting a “financial better-than-average” effect. Furthermore, we find that the pessimism regarding future household economic situation and being financially ignorant are associated with decreased financial well-being, while the (inter)national economic situation is not. This study shows how contextual factors and personal aspects shape financial well-being during turbulent and stressful times.

Suggested Citation

  • Barrafrem, Kinga & Västfjäll, Daniel & Tinghög, Gustav, 2020. "Financial well-being, COVID-19, and the financial better-than-average-effect," Journal of Behavioral and Experimental Finance, Elsevier, vol. 28(C).
    • Handle: RePEc:eee:beexfi:v:28:y:2020:i:c:s2214635020303373
    DOI: 10.1016/j.jbef.2020.100410
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    References listed on IDEAS

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    4. Strömbäck, Camilla & Skagerlund, Kenny & Västfjäll, Daniel & Tinghög, Gustav, 2020. "Subjective self-control but not objective measures of executive functions predicts financial behavior and well-being," Journal of Behavioral and Experimental Finance, Elsevier, vol. 27(C).
    5. Strömbäck, Camilla & Lind, Thérèse & Skagerlund, Kenny & Västfjäll, Daniel & Tinghög, Gustav, 2017. "Does self-control predict financial behavior and financial well-being?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 14(C), pages 30-38.
    6. Thérèse Lind & Ali Ahmed & Kenny Skagerlund & Camilla Strömbäck & Daniel Västfjäll & Gustav Tinghög, 2020. "Competence, Confidence, and Gender: The Role of Objective and Subjective Financial Knowledge in Household Finance," Journal of Family and Economic Issues, Springer, vol. 41(4), pages 626-638, December.
    7. Niklas Karlsson & George Loewenstein & Duane Seppi, 2009. "The ostrich effect: Selective attention to information," Journal of Risk and Uncertainty, Springer, vol. 38(2), pages 95-115, April.
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    As found on the RePEc Biblio, the curated bibliography for Economics:
    1. > Economics of Welfare > Health Economics > Economics of Pandemics > Specific pandemics > Covid-19 > Economic consequences > Finance and credit

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    1. Barrafrem, Kinga & Tinghög, Gustav & Västfjäll, Daniel, 2021. "Trust in the government increases financial well-being and general well-being during COVID-19," Journal of Behavioral and Experimental Finance, Elsevier, vol. 31(C).
    2. Gina Ionela Butnaru & Alina-Petronela Haller & Larisa-Loredana Dragolea & Alexandru Anichiti & Georgia-Daniela Tacu Hârșan, 2021. "Students’ Wellbeing during Transition from Onsite to Online Education: Are There Risks Arising from Social Isolation?," IJERPH, MDPI, vol. 18(18), pages 1-23, September.
    3. Sarah Levaj & Sara Medved & Jasmina Grubišin & Lea Tomašić & Kristina Brozić & Laura Shields-Zeeman & Felix Bolinski & Martina Rojnic Kuzman, 2023. "The impact of the COVID-19 pandemic and earthquake on mental health of persons with severe mental illness: A survey study among people receiving community mental health care versus treatment as usual ," International Journal of Social Psychiatry, , vol. 69(3), pages 653-663, May.
    4. Niculaescu, Corina E. & Sangiorgi, Ivan & Bell, Adrian R., 2023. "Does personal experience with COVID-19 impact investment decisions? Evidence from a survey of US retail investors," International Review of Financial Analysis, Elsevier, vol. 88(C).
    5. Leonore Riitsalu & Rene Sulg & Henri Lindal & Marvi Remmik & Kristiina Vain, 2024. "From Security to Freedom— The Meaning of Financial Well-being Changes with Age," Journal of Family and Economic Issues, Springer, vol. 45(1), pages 56-69, March.
    6. Hai-Anh H. Dang & Long T. Giang & Minh N. N. Do, 2021. "Building on Vietnam’s Recent COVID-19 Success: A Job-Focused Analysis of Individual Assessments on Their Finance and the Economy," Sustainability, MDPI, vol. 13(19), pages 1-21, September.
    7. Zericho R. Marak & Vaishali Pagaria, 2023. "Antecedents and consequences of financial well-being: evidence from working professionals in India," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 70(3), pages 341-378, September.
    8. Vieira, Kelmara Mendes & Potrich, Ani Caroline Grigion & Bressan, Aureliano Angel & Klein, Leander Luiz, 2021. "Loss of financial well-being in the COVID-19 pandemic: Does job stability make a difference?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 31(C).
    9. Linhai Zhao & Ehsan Rasoulinezhad & Tapan Sarker & Farhad Taghizadeh-Hesary, 2023. "Effects of COVID-19 on Global Financial Markets: Evidence from Qualitative Research for Developed and Developing Economies," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 35(1), pages 148-166, February.
    10. Magdalena Adamus & Matúš Grežo, 2021. "Individual Differences in Behavioural Responses to the Financial Threat Posed by the COVID-19 Pandemic," MUNI ECON Working Papers 2021-09, Masaryk University, revised Feb 2023.
    11. Rao, Purnima & Goyal, Nisha & Kumar, Satish & Hassan, M. Kabir & Shahimi, Shahida, 2021. "Vulnerability of financial markets in India: The contagious effect of COVID-19," Research in International Business and Finance, Elsevier, vol. 58(C).
    12. Zhang, Qingyu & Gao, Bohong & Luqman, Adeel, 2022. "Linking green supply chain management practices with competitiveness during covid 19: The role of big data analytics," Technology in Society, Elsevier, vol. 70(C).

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    More about this item

    Keywords

    Financial well-being; COVID-19 and finance; Financial ignorance; Better-than-average effect;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G50 - Financial Economics - - Household Finance - - - General

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