Household investment diversification amid Covid-19 pandemic: Evidence from Chinese investors

Sha, Yezhou; Zhang, Yong; Lu, Xiaomeng

doi:10.1016/j.frl.2022.102820

Cited by 12 publications

(7 citation statements)

References 29 publications

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“…Individuals are affected by negative news when faced with major contingencies such as COVID-19, causing investment sentiment and perceived uncertainty (Ali et al, 2020), while temporary business shutdowns and production stoppages cause shocks to the labor market, increasing individual labor income uncertainty (Khamis et al, 2021). Therefore, in the face of uncertainty about future scenarios, people's expectations about their income generate relatively pessimistic views, leading them to adopt more cautious and risk-averse choices when making investment decisions (Sha et al, 2022).…”

Section: Introductionmentioning

confidence: 99%

Impact of the COVID-19 pandemic on household financial asset allocation: A China population study

2022

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During the COVID-19 pandemic, the Chinese government implemented a “dynamic zero” epidemic prevention policy, which led to an increase in the likelihood of business shutdowns, increased uncertainty about people's income, and changes in people's psychological expectations, which in turn influenced their behavioral choices. This study aims to understand the impact of COVID-19 and other major public health emergencies on household financial asset allocation. To do so, we conducted an online survey of 712 people in China to measure household financial asset allocation behavior during three different time periods: pre-pandemic, mid-pandemic, and post-pandemic. At the same time, we analyzed the impact of sociodemographic characteristics on risk attitudes and the differences in household asset allocation decisions at different pre-pandemic time points among people with different risk attitudes. The results show that household financial asset allocation changed significantly before, during, and after the pandemic, and residents' precautionary savings increased. In addition, gender, education level, occupation, and annual income have significant effects on risk preferences. The pandemic leads to increased uncertainty in economic and social development, people's psychological expectations of economic development play an important role in household financial asset allocation.

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Section: Introductionmentioning

confidence: 99%

Impact of the COVID-19 pandemic on household financial asset allocation: A China population study

2022

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“…Studying the behaviour of Chinese investors during the 2008 financial crisis, Kallberg et al (2012) find that individual investors do not reduce investments in the stock market but shift their investments to less risky and more liquid stocks. Sha et al (2022) report similar findings for the COVID‐19 crisis, showing that individual investors diversify their investments amid the pandemic. However, Kallberg et al (2012) also find that individual investors display a stronger disposition effect (i.e., the tendency to hold on to losing positions longer than winning positions) in the crisis period than in the pre‐crisis period, indicating an exaggerated investor bias.…”

Section: Literature Reviewmentioning

confidence: 76%

Institutional and individual investors' short‐term reactions to the COVID‐19 crisis in China

Liu

Zhang

et al. 2023

Accounting & Finance

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This study examines how the severity of the local COVID‐19 crisis affected the investment divergence between institutional and individual investors in China. The COVID‐19 crisis significantly increased both environmental uncertainty and fear sentiment. We predict that individual investors, who are at an information disadvantage and rely more on heuristics, are more likely than institutional investors to decrease their investments in stocks of firms headquartered in provinces with more severe COVID‐19 crisis. We find that the number of newly confirmed local COVID‐19 cases is positively associated with the investment divergence between institutional and individual investors. Further analysis shows that the investment divergence is much lower for firms that have higher information disclosure quality, are followed by more analysts and engage Big 4 auditors. We also find that subsequent price reversals are faster for stocks with higher net investments by institutional investors and slower for stocks with higher net investments by individual investors. Lastly, we find that institutional investors increase their investments in undervalued stocks of firms located in provinces with more severe COVID‐19 crisis and firms less affected by the pandemic, whereas individual investors decrease such investments. The results suggest that institutional investors are more sophisticated in identifying undervalued stocks and analysing the impact of the information about the pandemic prevention policies on firms' operations. Our main results hold after a battery of robustness tests.

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“…Also, in the same line, firms with corporate social responsibility (CSR) related activities were exposed to a smaller extent to pandemic pressures. In addition, households became pessimistic during the pandemic, as Sha et al (2022) stated in their study on China, and were more cautious and highly risk-averse. Conversely, in Xu et al (2022) analyzed the impact of the new coronavirus on China's capital market, the authors found no significant impact on the market stock return; instead, they observed increased volatility of the market related to the pandemic.…”

Section: Literature Reviewmentioning

confidence: 92%

Analyzing the market performance of Romanian firms: do the COVID-19 crisis and classification type matter?

Nuta,

Habib,

Neslihanoglu

et al. 2024

IJOEM

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PurposeStock market performance is paramount to every country, as it signifies economic growth, business performance, wealth maximization, savings deployment and consumer confidence. This study investigates the disparities in the market performance of listed firms in Romania. This study also examines whether the COVID-19 crisis affected market performance.Design/methodology/approachThe data were collected from 69 firms listed on the Bucharest Stock Exchange (BSE) from 2018 to 2022, belonging to 11 sectors. This study used several methods to achieve its objectives. Difference tests were considered to analyze the performance of Romanian companies before and during the COVID-19 crisis, as well as across sectors. Regression analysis was also conducted to estimate the effect of the COVID-19 crisis and classification type on Romanian companies' performance. Additional analyses were performed to verify the findings of the present study.FindingsThe study’s findings indicate a clear difference in market performance between the pre-crisis and crisis periods. The COVID-19 pandemic had an adverse and significant impact on market performance. However, after the market contraction in the early stage of the COVID-19 pandemic outbreak, the stock market outperformed the pre-pandemic capitalization levels and the regional and global indices evolution. Furthermore, there was a difference in market performance across sectors. In particular, the communication services sector has specifically demonstrated accelerated growth.Originality/valueThis research examines the variation in the market performance of companies before and during the COVID-19 pandemic and across different sectors. It also provides evidence of the potential impact of COVID-19 on firms' market performance. This research contributes to a better understanding of how sectors perform during times of crisis.

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Household investment diversification amid Covid-19 pandemic: Evidence from Chinese investors

Cited by 12 publications

References 29 publications

Impact of the COVID-19 pandemic on household financial asset allocation: A China population study

Impact of the COVID-19 pandemic on household financial asset allocation: A China population study

Institutional and individual investors' short‐term reactions to the COVID‐19 crisis in China

Analyzing the market performance of Romanian firms: do the COVID-19 crisis and classification type matter?

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