Wealth Redistribution in Bubbles and Crashes

55 Pages Posted: 28 Jul 2020 Last revised: 16 Aug 2020

See all articles by Dong Lou

Dong Lou

London School of Economics & Political Science (LSE); Centre for Economic Policy Research (CEPR)

Date Written: July 2020

Abstract

Using comprehensive administrative data from China, we document a substantial increase in inequality of wealth held in risky assets 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 groups in 2012-14, a period of a relatively calm market, is an order of magnitude smaller. We examine a number of possible explanations for these findings and discuss their implications.

Keywords: bubbles and crashes, market participation, social impact, Wealth Inequality

JEL Classification: D14, D31, D91, G11, G51, O16

Suggested Citation

Lou, Dong, Wealth Redistribution in Bubbles and Crashes (July 2020). CEPR Discussion Paper No. DP15029, Available at SSRN: https://ssrn.com/abstract=3650144

Dong Lou (Contact Author)

London School of Economics & Political Science (LSE) ( email )

Department of Finance
Houghton Street
London, WC2A 2AE
United Kingdom
+44 (0)207 1075360 (Phone)

HOME PAGE: http://personal.lse.ac.uk/loud/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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