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Infectious disease outbreaks and the disposition effect of mutual fund investors

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  • Wang, Xiaoxiao
  • Zhang, Xueyong

Abstract

This study investigates the potential impact of the 2003 severe acute respiratory syndrome (SARS) epidemic on cognitive biases in capital markets, focusing on individual mutual fund investors’ trading behavior in the post-SARS era. Using a proprietary data set obtained from a large Chinese mutual fund family comprising comprehensive trading information, this research finds that individuals in areas experiencing severe SARS cases exhibit a stronger disposition effect after the end of the epidemic. It further indicates that unsophisticated investors are more vulnerable to the disposition effect and this mood regulation–induced behavior is irrational and related to behavioral biases, ultimately worsening investors’ circumstances. These results hold across a wide range of robustness checks.

Suggested Citation

  • Wang, Xiaoxiao & Zhang, Xueyong, 2025. "Infectious disease outbreaks and the disposition effect of mutual fund investors," Journal of Banking & Finance, Elsevier, vol. 171(C).
    • Handle: RePEc:eee:jbfina:v:171:y:2025:i:c:s0378426624002589
    DOI: 10.1016/j.jbankfin.2024.107344
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    More about this item

    Keywords

    SARS; Disposition effects; Mutual fund investors; Mood regulation;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G2 - Financial Economics - - Financial Institutions and Services

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