Balancing against geopolitical risk: Household investment portfolios during the U.S.-China trade war

Xiqian Cai, Zhengquan Cheng and Dongxu Li

Finance Research Letters, 2024, vol. 66, issue C

Abstract: Exploiting the unique context of the U.S.-China trade war, this study evaluates whether households balance their exposure to geopolitical risks with the risk of their investment portfolios. Difference-in-differences analysis reveals that Chinese households respond to the trade war by reducing risky asset holdings, and this effect is more pronounced in export-intensive cities. Additional evidence suggests that households become more risk-averse in response to the trade war. These results shed light on the implications of geopolitical risks for households’ financial decisions.

Keywords: Geopolitical risk; Household finance; Risk aversion; Trade war (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:66:y:2024:i:c:s1544612324007335

DOI: 10.1016/j.frl.2024.105703

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