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Wealth redistribution in bubbles and crashes

An, Li, Lou, Dong ORCID: 0000-0002-5623-4338 and Shi, Donghui (2022) Wealth redistribution in bubbles and crashes. Journal of Monetary Economics, 126. 134 - 153. ISSN 0304-3932

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Identification Number: 10.1016/j.jmoneco.2022.01.001

Abstract

What are the social-economic consequences of financial market bubbles and crashes? Using novel comprehensive administrative data from China, we document a substantial increase in inequality of wealth held in equity by Chinese households in the 2014–15 bubble-crash episode: the largest 0.5% households in the equity market gain, while the bottom 85% lose, 250B RMB through active trading in this period, or 30% of either group's initial equity wealth. In comparison, the return differential between the top and bottom household groups in 2012–14, a period of a relatively calm market, is on the order of 1 to 3%. We examine several possible explanations for these findings and discuss their broader implications.

Item Type: Article
Official URL: https://www.sciencedirect.com/journal/journal-of-m...
Additional Information: Funding: Tsinghua University [Grant 100030060]. © 2022 Elsevier B.V.
Divisions: Finance
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HG Finance
JEL classification: D - Microeconomics > D1 - Household Behavior and Family Economics > D14 - Personal Finance
D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions
D - Microeconomics > D9 - Intertemporal Choice and Growth > D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving
G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice; Investment Decisions
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O16 - Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
Date Deposited: 17 Feb 2022 10:09
Last Modified: 13 Jun 2022 09:48
URI: http://eprints.lse.ac.uk/id/eprint/113766

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