Balancing against geopolitical risk: Household investment portfolios during the US-China trade war

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.