Studies test investors’ risk aversion after crash

The coronavirus turmoil promised a rare chance to answer an elemental question in finance: does fear change how investors think after a market crash? Two recent studies that explore this debate reach opposing conclusions.

Received wisdom would say investors get skittish after crashes and bolder during booms. The idea is often used to explain why markets boom and bust at all – and has been incorporated into asset pricing models.

But how far these market swings are a product of investors’