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Title: Wealth Redistribution in Bubbles and Crashes

Author(s): Dong Lou

Publication Date: July 2020

Keyword(s): bubbles and crashes, market participation, social impact and Wealth Inequality

Programme Area(s): Financial Economics

Abstract: 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.

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Bibliographic Reference

Lou, D. 2020. 'Wealth Redistribution in Bubbles and Crashes'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=15029