Discussion paper

DP15029 Wealth Redistribution in Bubbles and Crashes

Using comprehensive administrative data from China, we document a substantial increase in inequality of wealth held in risky assets by Chinese households in the 2014-15 bubble-crash episode: the largest 0.5% households in the equity market gain, while the bottom 85% lose, 250B RMB through active trading in this period, or 30% of either group’s initial equity wealth. In comparison, the return differential between the top and bottom groups in 2012-14, a period of a relatively calm market, is an order of magnitude smaller. We examine a number of possible explanations for these findings and discuss their implications.

£6.00
Citation

Lou, D (2020), ‘DP15029 Wealth Redistribution in Bubbles and Crashes‘, CEPR Discussion Paper No. 15029. CEPR Press, Paris & London. https://cepr.org/publications/dp15029