Subconscious risk aversion and the long-term effect of a pandemic on asset holding: micro evidence from China

To catch an early glimpse of the long-term impact of the COVID-19 pandemic, we study how the SARS pandemic in 2003, which shares clinical features and containment measures with COVID-19, affects asset holding behaviour in the long term. Utilizing the exclusive data of a rare survey of 3,713 investors, we find a long-term adverse effect of SARS on the probability and depth of risky asset holding. Further analysis shows that SARS passes down its legacy by impairing investors’ psychological and cognitive health to generate subconscious risk aversion that restrains risky asset holdings. We contribute by using representative investor data to find the long-term effects of a pandemic, which root in human cognition/psychology and so will recur in pandemics that require decision-making (e.g. COVID-19), independent of times and economies.