Fear in the Stock Market: How COVID-19 Affects Preference for High- and Low- Priced Stocks
Pena-Marin, J, Adaval, R, Shen, L. (2021), "Fear in the Stock Market: How Covid-19 Affects Preference for High- and Low- Priced Stocks," in Journal of the Association for Consumer Research, Eds/ Kelly Goldsmith and Angela Y. Lee, Vol. 6, Issue 1 (Forthcoming), https://www.journals.uchicago.edu/doi/
54 Pages Posted: 11 Jan 2021 Last revised: 4 Jun 2021
Date Written: October 3, 2020
Does fear create a bias in favor of high-priced stocks? An analysis of the S&P 500 stock prices during the COVID-19 market crash showed that high-priced stocks outperformed low-priced ones (Study 1). Experimental data further confirmed that fear induced by thoughts about the pandemic increased individuals’ preference for high-priced stocks when they were forced to choose one stock from a set of alternatives (Study 2). Although fear generally decreased the preference for stocks when the market trended downward, this decrease was less for high-priced stocks than for low-priced ones (Study 3). Reasons for and implications of this bias are discussed.
Keywords: COVID-19, pandemics, investment decisions, financial decision-making, stock prices, fear
JEL Classification: M3
Suggested Citation: Suggested Citation