Does Personal Experience with COVID-19 Impact Investment Decisions? Evidence from a Survey of US Retail Investors

This paper explores the effect of personal experience with COVID-19 on US retail investors’ financial decision-making during the first COVID-19 wave. We use a cross-sectional dataset from an online survey of 1,031 US retail investors collected in July and August 2020 to assess if and how respondents change their investment decisions after the COVID-19 outbreak. Our results show that on average retail investors increase their investments during the first wave of COVID-19 by 4.7%, while many of them decrease their investments suggesting a high heterogeneity of investor behaviours. We show that personal experience with the virus can have unexpected positive effects on retail investments even when controlling for other factors. We find that investors who have personal experience with COVID-19, who are in a vulnerable health category, who tested positive, and who know someone in their close circle of friends or family who died because of COVID-19, increase their investments by 12%. An increase in the level of savings, saving goals and risk capacity are also associated with increased investments. Our findings are relevant to investors, regulators, financial advisors, and investment platforms and highlight the importance of providing retail investors with access to investment opportunities in periods of unprecedented shocks such as COVID-19