How Does Stock Market Volatility Affect Wealth Inequality? — Evidence from the Perspective of Portfolio Heterogeneity

Jiashan Li, Xingjian Yi, Biyun Yang and Li Zhou

Emerging Markets Finance and Trade, 2025, vol. 61, issue 9, 2786-2799

Abstract: Asset price changes play a pivotal role in driving wealth inequality. This paper takes the unexpected interest rate cut by the People’s Bank of China in 2014 as a “policy shock” and uses the Propensity Score Matching-Difference-in-Differences (PSM-DID) method along with the Triple Differences (DDD) model to assess the uneven wealth distribution effects generated by the interest rate reduction through the stock market. The findings indicate that as household participation in the stock market, stock market capitalization share, and stock asset allocation efficiency become increasingly skewed toward the upper echelons of wealth distribution, affluent households reap greater benefits from the stock market upswing, thereby contributing to the widening wealth gap. This paper complements research on the impact of monetary policy on wealth inequality through the asset price channel.

Date: 2025
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DOI: 10.1080/1540496X.2024.2430516

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