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Balancing against geopolitical risk: Household investment portfolios during the U.S.-China trade war

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  • Cai, Xiqian
  • Cheng, Zhengquan
  • Li, Dongxu

Abstract

Exploiting the unique context of the U.S.-China trade war, this study evaluates whether households balance their exposure to geopolitical risks with the risk of their investment portfolios. Difference-in-differences analysis reveals that Chinese households respond to the trade war by reducing risky asset holdings, and this effect is more pronounced in export-intensive cities. Additional evidence suggests that households become more risk-averse in response to the trade war. These results shed light on the implications of geopolitical risks for households’ financial decisions.

Suggested Citation

  • Cai, Xiqian & Cheng, Zhengquan & Li, Dongxu, 2024. "Balancing against geopolitical risk: Household investment portfolios during the U.S.-China trade war," Finance Research Letters, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:finlet:v:66:y:2024:i:c:s1544612324007335
    DOI: 10.1016/j.frl.2024.105703
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