 Retreating from risks: Household stock market participation in a protectionist eraJie Li and Wenchao Li Journal of Banking & Finance, 2025, vol. 172, issue C Abstract: We examine the impact of the global trend towards trade protectionism on household stock market participation, focusing on the 2018–19 US-China trade war as an exogenous trade shock. We leverage cross-city variation in exposure to the trade war by combining industry-specific increases in US tariffs with variation in industry composition across cities. Using nationally representative household finance survey data collected around the trade war years, and a difference-in-differences design, results show that the onset of the trade war decreases the likelihood of households participating in the stock market and reduces the proportion of stocks in their portfolios. Further evidence reveals that these effects stem from the trade war's influence on decreasing household income, increasing income volatility, fostering risk aversion, and promoting negative views or beliefs about the economy. Our findings suggest that reduced stock market participation is a pathway through which trade protectionism affects the financial system and the economy. Keywords: Household portfolio choice; Stock market participation; Risky assets; Risk preference; The trade war (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:172:y:2025:i:c:s0378426625000135 DOI: 10.1016/j.jbankfin.2025.107392 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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