No. 25: COVID-19 and investor behavior

Abstract

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.

Participating Institutions

TRR 266‘s main locations are Paderborn University (Coordinating University), HU Berlin, and University of Mannheim. All three locations have been centers for accounting and tax research for many years. They are joined by researchers from LMU Munich, Frankfurt School of Finance and Management, WHU – Otto Beisheim School of Management, European School of Management and Technology in Berlin and Goethe University Frankfurt who share the same research agenda.