Exposure to the COVID-19 Stock Market Crash and its Effect on Household Expectations

77 Pages Posted: 15 Jul 2020

See all articles by Tobin Hanspal

Tobin Hanspal

WU Vienna University of Economics and Business; Vienna Graduate School of Finance (VGSF)

Annika Weber

Goethe University Frankfurt; Leibniz Institute for Financial Research SAFE

Johannes Wohlfart

University of Copenhagen

Multiple version iconThere are 3 versions of this paper

Date Written: May 25, 2020

Abstract

We survey a representative sample of US households to study how exposure to the COVID-19 stock market crash affects expectations and planned behavior. Wealth shocks are associated with upward adjustments of expectations about retirement age, desired working hours, and household debt, but have only small effects on expected spending. We provide correlational and experimental evidence that beliefs about the duration of the stock market recovery shape households’ expectations about their own wealth and their planned investment decisions and labor market activity. Our findings shed light on the implications of household exposure to stock market crashes for expectation formation.

Keywords: coronavirus, wealth shocks, income shocks, expectations, inequality

JEL Classification: D140, D310, D830, D840, D910

Suggested Citation

Hanspal, Tobin and Weber, Annika and Wohlfart, Johannes, Exposure to the COVID-19 Stock Market Crash and its Effect on Household Expectations (May 25, 2020). CESifo Working Paper No. 8244, Available at SSRN: https://ssrn.com/abstract=3587258 or http://dx.doi.org/10.2139/ssrn.3587258

Tobin Hanspal (Contact Author)

WU Vienna University of Economics and Business ( email )

Welthandelsplatz 1 1
Wien, 1020
Austria

Vienna Graduate School of Finance (VGSF) ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

Annika Weber

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Johannes Wohlfart

University of Copenhagen ( email )

Øster Farimagsgade 5
Building 35
Copenhagen, DK-1353
Denmark

HOME PAGE: http://https://sites.google.com/site/johanneswohlfartecon/home

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