Effect of digital finance on household financial asset allocation: a social psychology perspective

Over the past decade, digital finance has rapidly advanced, attracting significant attention due to its profound economic implications. Additionally, its development deeply affects social psychology and household behavior. This study examines the influence of digital finance on household financial asset allocation from a social psychological perspective, exploring how technological progress and economic transitions alter human behavior. Utilizing the China Household Finance Survey (CHFS) data from 2015, 2017, and 2019, combined with county-level digital finance data, empirical results show digital finance significantly promotes household participation in financial markets. This increased participation fosters a higher allocation toward risky financial assets, particularly equities, thereby enhancing portfolio diversification. From a psychological standpoint, such effects emerge as digital finance elevates individuals’ interest in and awareness of economic and financial matters, reshapes risk perceptions, and strengthens social interactions. Heterogeneity analysis further reveals that while the positive effects are somewhat weaker in rural and agriculturally registered households, they are significantly more pronounced in households characterized by higher education levels, greater average age, substantial assets, and entrepreneurial activities. Consequently, this research provides policymakers valuable insights into employing digital finance strategically to optimize household asset allocation and mitigate financial risks by shaping psychological and behavioral tendencies.