Knowledge Tree
economic downturn
Also known as: economic downturn, economic downturns
Facts (12)
Sources
Financial Decision-Making: Psychology, Behavior & Risk Insights climbproject.org.uk Aug 11, 2025 3 facts
claimEconomic downturns alter psychological states, which leads to behavioral changes that hinder effective personal financial decision-making.
claimResearch indicates that cognitive biases, specifically loss aversion, become more pronounced during economic downturns, causing people to avoid necessary investments or miss opportunities for growth.
claimEconomic downturns induce fear and uncertainty, causing individuals to prioritize short-term stability over long-term gains.
Chapter 8 – Risk and Return – Fundamentals of Finance pressbooks.pub 3 facts
claimBonds and stocks may exhibit negative or low correlation because bonds are fixed-income assets that often rise in value when stocks decline during economic downturns.
claimMarket risk, also known as non-diversifiable risk, is characterized by events that impact the entire market, such as economic downturns, inflation, interest rate changes, and political or global events like elections, wars, or pandemics.
accountDuring the global financial crisis of 2008, almost all sectors and stocks experienced losses regardless of the specific industry, demonstrating that diversification within stocks could not shield portfolios from the effects of the economic downturn.
1.3: Systemic or "Macro" Factors That Affect Financial Thinking biz.libretexts.org Aug 23, 2025 1 fact
claimIndividuals should anticipate the risks of economic downturns, such as the potential loss of wage or investment income, while avoiding reliance on windfalls from economic expansions.
The Relationship Between Risk and Return in Different Asset Classes bi-sam.com Mar 18, 2025 1 fact
claimDuring economic downturns, high-quality bonds and cash often outperform riskier assets.
Systemic or “Macro” Factors that Affect Financial Thinking nicoletcollege.pressbooks.pub 1 fact
claimInvesting to create other forms of income serves as a hedge against the potential loss of wage income during economic downturns.
Mental health - World Health Organization (WHO) who.int Oct 8, 2025 1 fact
claimGlobal threats such as economic downturns, disease outbreaks, humanitarian emergencies, forced displacement, and climate change impact the mental health of entire populations.