Fear in the Stock Market: How COVID-19 Affects Preference for High- and Low-Priced Stocks

Jorge Pena-Marin, Rashmi Adaval and Liang Shen

Journal of the Association for Consumer Research, 2022, vol. 7, issue 1, 115 - 123

Abstract: Does fear create a bias in favor of high-priced stocks? An analysis of the S&P 500 stock prices during the COVID-19 market crash showed that high-priced stocks outperformed low-priced ones (study 1). Experimental data further confirmed that fear induced by thoughts about the pandemic increased individuals’ preference for high-priced stocks when they were forced to choose one stock from a set of alternatives (study 2). Although fear generally decreased the preference for stocks when the market trended downward, this decrease was less for high-priced stocks than for low-priced ones (study 3). Reasons for and implications of this bias are discussed.

Date: 2022
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