Stock Market Crashes and Household Consumption: Evidence From China's 2015 Crash

This paper investigates how stock market crashes affect household consumption in China. Using the 2015 stock market crash as a quasi‐natural experiment and employing a difference‐in‐differences strategy, we obtain three sets of findings. First, the crash caused a statistically and economically significant reduction in consumption among stockholders relative to nonstockholders, with total consumption declining by 9.0% on average. Second, this reduction operates primarily through a financial wealth channel, which affects both risky asset values and liquid safe asset holdings. Third, the consumption decline is more pronounced for durable goods and among urban, less educated, elderly, and risk‐seeking households.