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Exposure to the COVID-19 Stock Market Crash and Its Effect on Household Expectations

Author

Listed:
  • Tobin Hanspal

    (WU Vienna University of Economics and Business)

  • Annika Weber

    (Goethe University Frankfurt and Leibniz Institute for Financial Research SAFE)

  • Johannes Wohlfart

    (University of Copenhagen, CESifo, and Danish Finance Institute)

Abstract

We survey a representative sample of U.S. households to study how exposure to the COVID-19 stock market crash affects expectations and planned behavior. Wealth shocks are associated with upward adjustments of expectations about retirement age, desired working hours, and household debt but have only small effects on expected spending. We provide correlational and experimental evidence that beliefs about the duration of the stock market recovery shape households' expectations about their own wealth and their planned investment decisions and labor market activity. Our findings shed light on the implications of household exposure to stock market crashes for expectation formation.

Suggested Citation

  • Tobin Hanspal & Annika Weber & Johannes Wohlfart, 2021. "Exposure to the COVID-19 Stock Market Crash and Its Effect on Household Expectations," The Review of Economics and Statistics, MIT Press, vol. 103(5), pages 994-1010, December.
    • Handle: RePEc:tpr:restat:v:103:y:2021:i:5:p:994-1010
    DOI: 10.1162/rest_a_01011
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