The effects of the Global Financial Crisis on the stock holding decisions of Australian households
BA Cardak, VL Martin, R McAllister
The North American Journal of Economics and Finance | Elsevier | Published : 2019
The effects of financial crises on the stock market participation and portfolio allocation decisions of Australian households are studied, with special emphasis on the 2008 Global Financial Crisis. An important feature of the empirical model is that the stock holding decisions of households are determined by experienced returns, defined as a weighted sum of past stock market returns over the life of a household, with the weights varying between crisis and non-crisis periods. The empirical results provide strong evidence that financial crises cause households to become more myopic, increase their responsiveness to shocks and focus more on past extreme returns. These results also help to expla..View full abstract
Financial support from the La Trobe Business School internal research grant scheme (IRGS) is gratefully acknowledged. Part of this research was undertaken while Cardak was visiting the MIAESR at the University of Melbourne, he gratefully acknowledges their hospitality. This paper uses unit record data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey. The HILDA Project was initiated and is funded by the Australian Government Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) which is managed by the Melbourne Institute of Applied Economic and Social Research (MIAESR). The findings and views reported in this paper are those of the authors and should not be attributed to FaHCSIA or the MIAESR.