Infectious disease outbreaks and the disposition effect of mutual fund investors

Xiaoxiao Wang and Xueyong Zhang

Journal of Banking & Finance, 2025, vol. 171, issue C

Abstract: This study investigates the potential impact of the 2003 severe acute respiratory syndrome (SARS) epidemic on cognitive biases in capital markets, focusing on individual mutual fund investors’ trading behavior in the post-SARS era. Using a proprietary data set obtained from a large Chinese mutual fund family comprising comprehensive trading information, this research finds that individuals in areas experiencing severe SARS cases exhibit a stronger disposition effect after the end of the epidemic. It further indicates that unsophisticated investors are more vulnerable to the disposition effect and this mood regulation–induced behavior is irrational and related to behavioral biases, ultimately worsening investors’ circumstances. These results hold across a wide range of robustness checks.

Keywords: SARS; Disposition effects; Mutual fund investors; Mood regulation (search for similar items in EconPapers)
JEL-codes: G10 G2 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:171:y:2025:i:c:s0378426624002589

DOI: 10.1016/j.jbankfin.2024.107344

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