Effects of the COVID-19 Crisis on Stock Market Beliefs and Investment Decisions

Samuel Hartzmark, Associate Professor of Finance
Abigail Sussman, Associate Professor of Marketing

The current health crisis surrounding COVID-19 quickly evolved into an economic crisis as well, with significant implications for financial markets. While fundamental value may have shifted or been lost as a result of the health crisis and societal response, this shift cannot fully explain the current market volatility. Instead, we propose that psychological factors unrelated to financial markets, such as emotions and beliefs about disease spread, can partially account for the market response. This proejct will be the first to directly investigate the impact of mood at the invididual level, as well as being the first to examine the role of specific emotions (e.g., versus valence) on investor beliefs and decisions. We plan to conduct a series of nationally representative surveys over the next 12-14 months asking a broad range of questions regarding participant psychology, beliefs about COVID-19, and beliefs about financial markets. 

Download the working paper (PDF)

When a gain becomes a loss: The effect of wealth predictions on financial decisions, with Jennifer S. Trueblood and Abigail B. Sussman. Cognition, Volume 215, October 2021, 104822.