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COVID-19 and investor behavior

Author

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  • Ortmann, Regina
  • Pelster, Matthias
  • Wengerek, Sascha Tobias

Abstract

How do retail investors respond to the outbreak of COVID-19? We use transaction-level trading data to show that investors significantly increase their trading activities as the COVID-19 pandemic unfolds, both at the extensive and at the intensive margin. Investors, on average, increase their brokerage deposits and open more new accounts. The average weekly trading intensity increases by 13.9% as the number of COVID-19 cases doubles. The increase in trading is especially pronounced for male and older investors, and affects stock and index trading. Following the 9.99%-drop of the Dow Jones on March 12, investors significantly reduce the usage of leverage.

Suggested Citation

  • Ortmann, Regina & Pelster, Matthias & Wengerek, Sascha Tobias, 2020. "COVID-19 and investor behavior," Finance Research Letters, Elsevier, vol. 37(C).
    • Handle: RePEc:eee:finlet:v:37:y:2020:i:c:s1544612320307959
    DOI: 10.1016/j.frl.2020.101717
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    References listed on IDEAS

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    More about this item

    Keywords

    Trading behavior; Retail investors; Risk-taking; Pandemic; COVID-19;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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