The Long-term effect of social disasters on stock market participation

Yang Cai, Shuo Chen and Dongxu Li

Journal of Corporate Finance, 2025, vol. 93, issue C

Abstract: This study examines the long-term impact of social disaster experiences on household finance. Using the Cultural Revolution in China, the country's most pronounced sociopolitical turmoil that completely disrupted millions of people's lives, we show that households are more likely to participate in the stock market if their eldest member was more exposed to the turmoil. The results remain robust to alternative historical events, socioeconomic factors, and household characteristics. Survey results suggest that the more exposed individuals invest in the stock market because they perceive stocks as low risk rather than have altered risk preferences or trust in stock markets.

Keywords: Social disaster; Long-term effect; Risk perception; Household finance (search for similar items in EconPapers)
JEL-codes: D14 D91 G41 I15 P36 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:93:y:2025:i:c:s0929119925000677

DOI: 10.1016/j.jcorpfin.2025.102799

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