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Wealth redistribution in bubbles and crashes

Li An, Dong Lou and Donghui Shi

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: What are the social-economic consequences of financial market bubbles and crashes? Using novel comprehensive administrative data from China, we document a substantial increase in inequality of wealth held in equity by Chinese households in the 2014–15 bubble-crash episode: the largest 0.5% households in the equity market gain, while the bottom 85% lose, 250B RMB through active trading in this period, or 30% of either group's initial equity wealth. In comparison, the return differential between the top and bottom household groups in 2012–14, a period of a relatively calm market, is on the order of 1 to 3%. We examine several possible explanations for these findings and discuss their broader implications.

Keywords: bubbles and crashes; investment skills; market participation; wealth inequality; 71903106; 71790591; 71790605 (search for similar items in EconPapers)
JEL-codes: D14 D31 D91 G11 O16 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2022-03-01
New Economics Papers: this item is included in nep-cna and nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in Journal of Monetary Economics, 1, March, 2022, 126, pp. 134 - 153. ISSN: 0304-3932

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