Terrorist Attacks and Household Trading

59 Pages Posted: 7 Sep 2019 Last revised: 11 Sep 2019

See all articles by Yan Albert Wang

Yan Albert Wang

Auburn University

Michael Young

University of Virginia - Darden School of Business

Date Written: August 28, 2019

Abstract

Using two sources of household data, we show that in response to psychological distress induced by terrorist attacks, households significantly reduce their trading activity and equity ownership, are less likely to enter the market, and increase the value of their savings accounts. We find that the effects of attacks are stronger in months with more casualties and increased news coverage, as well in households with a male head and in those located in the same state as the attack. Further tests on security selection suggest that our findings are consistent with risk shifting and inattention as implied by an anxiety-based utility model.

Keywords: Terrorism, Stock Market Participation, Household Finance, Attention, Anxiety

JEL Classification: G11, G14, H56

Suggested Citation

Wang, Yan Albert and Young, Michael, Terrorist Attacks and Household Trading (August 28, 2019). Available at SSRN: https://ssrn.com/abstract=3445583 or http://dx.doi.org/10.2139/ssrn.3445583

Yan Albert Wang

Auburn University ( email )

315 Lowder Hall
Department of Finance
Auburn, AL 36849
United States

Michael Young (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22904
United States

HOME PAGE: http://www.michaelyoungphd.com/

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