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Risk attitude, financial literacy and household consumption: Evidence from stock market crash in China

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  • Zhang, Yixing
  • Jia, Qinmin
  • Chen, Chen

Abstract

The most recent stock market crash occurred in 2015 and caused a huge negative impact on the household sector. This paper assesses the impact of stock market crash on households’ financial income and consumption. We find that the financial income of households holding risky assets decreased significantly, in the meanwhile, financial literacy and investment experience did not help reduce loses. In terms of consumption, households with different risk attitude and financial literacy have significant differences in whether they choose smoother consumption decisions after the shock. Finally, based on the empirical results, we estimate that the stock market crash caused the consumption of residents in 2016 to decrease by 87.53 billion RMB, accounting for 0.30% of the total resident consumption.

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  • Zhang, Yixing & Jia, Qinmin & Chen, Chen, 2021. "Risk attitude, financial literacy and household consumption: Evidence from stock market crash in China," Economic Modelling, Elsevier, vol. 94(C), pages 995-1006.
    • Handle: RePEc:eee:ecmode:v:94:y:2021:i:c:p:995-1006
    DOI: 10.1016/j.econmod.2020.02.040
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    More about this item

    Keywords

    Risk attitude; Financial literacy; Consumption; Stock market crash;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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