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Individual investment adaptations to COVID-19 lockdowns

Author

Listed:
  • Huang, Bin
  • Wang, Bin
  • Chen, Zixuan

Abstract

Utilizing online wealth management data from Ant Financial and manually curated data from COVID-19 lockdown regions in China, this study sheds light on the impact of COVID-19 lockdowns on individual investment pattern. Applying a Staggered Difference-in-Differences methodology, we find significant decrease in both the volume and proportion of individual holdings in risky mutual funds after their initial exposure to lockdowns. This decline mainly corresponds to a decrease in risky mutual fund purchases and an increase in redemptions. Mechanism analysis reveals this change is due to a notable decrease in individuals’ overall assets during lockdowns, leading to a higher allocation toward risk-free money market funds. Heterogeneity analysis highlights these impacts are more pronounced among individuals with lower risk tolerance. Additionally, there is a notable drop in individuals’ equity fund holdings. The lockdowns prompt a conservative shift in individuals’ wealth strategies.

Suggested Citation

  • Huang, Bin & Wang, Bin & Chen, Zixuan, 2024. "Individual investment adaptations to COVID-19 lockdowns," The North American Journal of Economics and Finance, Elsevier, vol. 70(C).
    • Handle: RePEc:eee:ecofin:v:70:y:2024:i:c:s1062940823001948
    DOI: 10.1016/j.najef.2023.102071
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    More about this item

    Keywords

    Risky mutual fund; Individual investment decisions; Risk-taking; COVID-19 lockdown;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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