Exposure to the COVID-19 Stock Market Crash and Its Effect on Household Expectations

Tobin Hanspal; Annika Weber; Johannes Wohlfart

doi:10.1162/rest_a_01011

Exposure to the COVID-19 Stock Market Crash and Its Effect on Household Expectations

Tobin Hanspal¹; Annika Weber²; Johannes Wohlfart³

¹ WU Vienna University of Economics and Business · ² Goethe University Frankfurt and Leibniz Institute for Financial Research SAFE · ³ University of Copenhagen, CESifo, and Danish Finance Institute

The Review of Economics and Statistics 2021 open access

Abstract We survey a representative sample of U.S. households to study how exposure to the COVID-19 stock market crash affects expectations and planned behavior. Wealth shocks are associated with upward adjustments of expectations about retirement age, desired working hours, and household debt but have only small effects on expected spending. We provide correlational and experimental evidence that beliefs about the duration of the stock market recovery shape households' expectations about their own wealth and their planned investment decisions and labor market activity. Our findings shed light on the implications of household exposure to stock market crashes for expectation formation.

DOI: 10.1162/rest_a_01011
Volume: 103 (5)
Pages: 994-1010
Language: en
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