Trading Behavior of Swedish Retirement Investors During the COVID-19 Pandemic

Abstract

How did investors in the Swedish Premium Pension System (PPS) react to the stock market shock ignited by the COVID-19 pandemic? Trades more than doubled, and shifted capital from equity funds to low risk interest funds. The increased trading during the market tumult was disproportionately concentrated among investors in the top of the pension capital distribution. In economic terms, however, trading stayed at low levels—less than two percent of investors traded in March 2020. The PPS investors thus avoided the many mistakes that retail investors incur when trying to outsmart the market. Potentially, the often-criticized PPS choice architecture inducing inertia provided positive side effects. Finally, we find no effect of the COVID-19 outbreak on public pension withdrawals.

Keywords: Financial crisis, COVID-19 pandemic, Retirement investors, Trading behavior, Risk-taking behavior

JEL Classification: D14, D81, G01, G11, G28