Presentation Schedule
Disaster Experience and Risk-Taking Behaviors: Evidence from Retail Stock Trading (88774)
Session Chair: Alex Yue Feng Zhu
Friday, 28 March 2025 15:10
Session: Session 4
Room: Room 704 (7F)
Presentation Type: Oral Presentation
This study investigates how natural disasters affect the stock trading decisions of individual investors. Our sample covers the period between July 12, 2012, and December 30, 2016, and encompasses the aggregate daily trading activities of retail investors from 132 districts in Taiwan. Totally, our final sample includes 142,393 district-date observations. We combine this data with 144 natural disasters (such as typhoons, floods, earthquakes, landslides, explosions, and train derailments). On average, these events result in around 19 deaths per incident in the treated district. To test the hypothesis, we used panel-data regressions and difference-in-difference analysis. Individuals who have been through major natural disasters tend to trade more aggressively, take greater risks, and earn abnormal returns compared to those who haven't. The impact is greater for disasters with higher casualties and for stocks that individual investors usually favor, like those with strong past performance or small companies. Additionally, our findings reveal that individual investors who face major natural disasters show a greater propensity for risk-taking, as they choose riskier stocks to include in their portfolio. However, this cognitive bias, like historical natural disasters, tends to have less impact on experienced investors. Furthermore, our findings remain strong in multiple robustness tests and settings. Our study adds to the increasing body of economics and finance literature by shedding light on how extreme events affect the economic decisions of retail investors, an area frequently overlooked. Finally, our study reveals insights into how retail investors perceive trading as gambling and sensational seeking behavior.
Authors:
Dien Giau Bui, Yuan Ze University, Taiwan
Iftekhar Hasan, Fordham University, United States
Gaiyan Zhang, University of Missouri-St. Louis, United States
Chih-Yung Lin, National Yang-Ming Chiao-Tung University, Taiwan
About the Presenter(s)
Dr. Dien Giau Bui is an Associate Professor at Yuan Ze University in Taiwan.
Connect on Linkedin
https://www.linkedin.com/in/buidiengiau/
See this presentation on the full schedule – Friday Schedule
Conference Comments & Feedback
Place a comment using your LinkedIn profileShare this Presentation
Comments
Powered by WP LinkPress