Abstract
The Universal Two-Child Policy (UTCP) was implemented in 2016 to mitigate China's aging society. Based on the China Household Finance Survey in 2015 and 2017, this paper applies a difference-in-difference (DID) model to investigate the UTCP's impact on households' stock market participation behavior. The results show that the UTCP has a negative impact on stock market participation, which reduces households' stock market participation ratio as well as stock allocation in their financial portfolios. This decline is caused by the change in the risk preference of households. Furthermore, the impact of UTCP is more pronounced for households that are more risk averse, households that live in first- and second-tier cities, households that live in central and eastern China and households that have already had one child. Overall, this study provides new insights into the impact of China's UTCP on households' economic behavior and their decisions regarding financial market participation.
| Original language | English |
|---|---|
| Article number | 102475 |
| Number of pages | 13 |
| Journal | International Review of Financial Analysis |
| Volume | 86 |
| Early online date | 22 Dec 2022 |
| DOIs | |
| Publication status | Published - Mar 2023 |
| Externally published | Yes |
Bibliographical note
Publisher Copyright:© 2022 Elsevier Inc.
Funding
This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors.
Keywords
- Household finance
- Stock market participation
- Universal two-child policy
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