Investigating Heterogeneity in Risk Assessment During Covid-19 Pandemic on Household Investment Decision-making

The economic fallout from Covid-19 pandemic changes the financial sector, especially individuals investment perceptions and behaviors in a tremendous way. Consequently, investment decision-making has been affected as people have to adjust to the new environment. The research gap is that limited number of related studies have mixed results on risk assessment during Covid-19 pandemic. For example, it is found that households tend to become risk aversion amidst the Covid-19 (Yue, Gizem Korkmaz and Zhou 2020). However, it is discovered that individuals risk tolerance increases for the early stages of COVID-19 by using an incentivized experiment (Shachat, Walker and Wei 2020), and one study found that there is no change in risk assessment in a risk elicitation task during Covid-19 (Angrisani, et al. 2020). The mixed results intrigue this study to investigate the heterogeneity in households risk assessment (i.e., risk taking or risk avoidance) due to the economic slowdown. Variables such as Covid-19 proximity, risk compensation countermeasures, age, income, job, education, savings, health status, and family size are chosen as independent variables, and investment portfolio changes are used as dependent variables. The empirical results are expected to be analyzed from the household finance data. Linear probability model (LPM) and probit model will be employed for data analysis to secure the robustness of the research findings. The work on the proposed research will be accomplished in three phases. The first phase will be carrying out an extensive literature review and laying down the theoretical foundations and research model. The second phase will be concerned with the empirical part of the project which entails collecting data, conduct data analyses, and interpret the results. Lastly, the project outcomes will be published in a scholarly journal. The PI and CoIs will be extensively involved throughout the entire duration of the project. They will perform all tasks jointly. This study contributes to the newly emerged body of knowledge on during/post pandemic investment decision-making and heterogeneity in risk assessment and behavior analysis and provide implications for government regulators and financial investment institutions on quantitative economics.