Financial well-being, COVID-19, and the financial better-than-average-effect

Kinga Barrafrem; Daniel Västfjäll; Gustav Tinghög

doi:10.1016/j.jbef.2020.100410

Financial well-being, COVID-19, and the financial better-than-average-effect

J Behav Exp Finance. 2020 Dec:28:100410. doi: 10.1016/j.jbef.2020.100410. Epub 2020 Oct 6.

Authors

Kinga Barrafrem¹, Daniel Västfjäll^{2

3}, Gustav Tinghög^{1

4}

Affiliations

¹ JEDI Lab, Division of Economics, Department of Management and Engineering, Linköping University, Linköping, Sweden.
² JEDI Lab, Division of Psychology, Department of Behavioral Sciences and Learning, Linköping University, Linköping, Sweden.
³ Decision Research, Eugene, OR, USA.
⁴ The National Center for Priority Setting in Health Care, Department of Medical and Health Sciences, Linköping University, Linköping, Sweden.

Abstract

At the onset of the COVID-19 outbreak we conducted two surveys in the United Kingdom and Sweden (N=2021) regarding how people assess the near future economic situation within their household, nation, and the world. Together with psychological factors related to information processing we link these prospects to financial well-being. We find that, although generally very pessimistic, a substantial proportion of individuals believes that their households' economy will be doing substantially better than the national and global economy, suggesting a "financial better-than-average" effect. Furthermore, we find that the pessimism regarding future household economic situation and being financially ignorant are associated with decreased financial well-being, while the (inter)national economic situation is not. This study shows how contextual factors and personal aspects shape financial well-being during turbulent and stressful times.

Keywords: Better-than-average effect; COVID-19 and finance; Financial ignorance; Financial well-being.