COVID-19 and Investor Behavior
TAF Working Paper No. 54 / April 2020
25 Pages Posted: 3 May 2020 Last revised: 6 May 2020
Date Written: April 1, 2020
How do retail investors respond to the outbreak of COVID-19? We use transaction-level trading data to show that investors significantly increase their trading activities as the COVID-19 pandemic unfolds, both at the extensive and at the intensive margin. The average weekly trading intensity increases by 13.9% as the number of COVID-19 cases doubles. The increase in trading is especially pronounced for male and older investors, and affects stock and index trading. Following the 9.99%-drop of the Dow Jones Industrial Average on March 12, investors significantly reduce the usage of leverage across all asset classes.
Keywords: Trading Behavior, Risk-Taking, Pandemic, COVID-19
JEL Classification: G10, G11, G12, G40, G41
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