Quotation Huber, Christoph, Huber, Jürgen, Kirchler, Michael. 2021. Market Shocks and Professionals’ Investment Behavior – Evidence from the COVID-19 Crash. Journal of Banking & Finance. 106247




We investigate how the experience of extreme events, such as the COVID-19 market crash, influence risk-taking behavior. To isolate changes in risk-taking from other factors, we ran controlled experiments with finance professionals in December 2019 and March 2020. We observe that their investments in the experiment were 12 percent lower in March 2020 than in December 2019, although their price expectations had not changed, and although they considered the experimental asset less risky during the crash than before. This lower perceived risk is likely due to adaptive normalization, as volatility during the shock is compared to volatility experienced in real markets (which was low in December 2019, but very high in March 2020). Lower investments during the crash can be supported by higher risk aversion, not by changes in beliefs.


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Status of publication Published
Affiliation External
Type of publication Journal article
Journal Journal of Banking & Finance
Language English
Title Market Shocks and Professionals’ Investment Behavior – Evidence from the COVID-19 Crash
Year 2021
Page from 106247
Reviewed? Y
URL https://api.elsevier.com/content/article/PII:S0378426621002065?httpAccept=text/xml
DOI http://dx.doi.org/10.1016/j.jbankfin.2021.106247
Open Access Y
Open Access Link https://doi.org/10.1016/j.jbankfin.2021.106247


Huber, Christoph (Details)
Huber, Jürgen (University of Innsbruck, Austria)
Kirchler, Michael (University of Innsbruck, Austria)
Institute for Markets and Strategy IN (Details)
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