Mood, attention, and household trading: Evidence from terrorist attacks

Albert Y. Wang and Michael Young

Journal of Financial Markets, 2023, vol. 66, issue C

Abstract: In response to terrorism, households reduce their trading activity and equity ownership. While the decline in the net value of trades is consistent with increasing risk aversion, reduced Google search volumes, lower aggregate attention indices, and fewer purchases of newsworthy stocks suggest that investors pay less attention to the financial markets after attacks. Additional tests indicate that investor inattention is driven by distress-induced avoidance rather than distraction, and the effect is limited to retail investors. Finally, reduced retail trading after attacks leads to a decline in stock liquidity.

Keywords: Terrorism; Retail trading; Household finance; Attention; Anxiety (search for similar items in EconPapers)
JEL-codes: D91 G11 G41 G51 H56 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:66:y:2023:i:c:s1386418123000563

DOI: 10.1016/j.finmar.2023.100858

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