Why Was There More Household Stock Market Participation During the COVID-19 Pandemic?

Wenyuan Zheng, Bingqing Li, Zhiyong Huang and Lu Chen

Finance Research Letters, 2022, vol. 46, issue PB

Abstract: Although the nation was experiencing an economic downturn due to the COVID-19 pandemic outbreak, we nonetheless observed an increase in household equity share value relative to both domestic market capitalization and retail investors’ trading volume. In this paper, we aim to interpret the reasons underlying this seemingly unexpected phenomenon. We investigate portfolio choices with stocks, bonds, and life annuities under an inverse S-shaped probability distortion function. The results indicate that people invest more heavily in risky assets and buy more annuities when reducing their savings in risk-free accounts, which is indeed consistent with the reality.

Keywords: COVID-19 pandemic; Household equity value; Two-sided skewness; Inverse S-shaped probability distortion function; Portfolio choice problem (search for similar items in EconPapers)
JEL-codes: G01 G11 G50 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:46:y:2022:i:pb:s154461232100458x

DOI: 10.1016/j.frl.2021.102481

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