Abstract
Utilizing online wealth management data from Ant Financial and manually curated data from COVID-19 lockdown regions in China, this study sheds light on the impact of COVID-19 lockdowns on individual investment pattern. Applying a Staggered Difference-in-Differences methodology, we find significant decrease in both the volume and proportion of individual holdings in risky mutual funds after their initial exposure to lockdowns. This decline mainly corresponds to a decrease in risky mutual fund purchases and an increase in redemptions. Mechanism analysis reveals this change is due to a notable decrease in individuals’ overall assets during lockdowns, leading to a higher allocation toward risk-free money market funds. Heterogeneity analysis highlights these impacts are more pronounced among individuals with lower risk tolerance. Additionally, there is a notable drop in individuals’ equity fund holdings. The lockdowns prompt a conservative shift in individuals’ wealth strategies.
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