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Portfolio Choice with Nonfungible Brokerage Cash

Year: 2026

Type: article

Abstract: Standard portfolio-choice models treat cash as fungible. Using positions and transfer records for 46,016 Chinese investors, we show that brokerage cash is nonfungible and that cash-source effects refresh and decay. We label inflows from savings transfers as “cold” and trading-recycled funds as “hot” and construct a cash-temperature measure tracking these dynamics. Investors allocate colder cash to safer stocks, controlling for gains and losses, trading intensity, and rebalancing. Quasi-experimental variation from China’s 2016 IPO reform supports a causal interpretation. A preregistered experiment links cold framing to loss aversion; a model with temperature-dependent sensitivity to gains and losses rationalizes the evidence.

Source: Journal of Financial and Quantitative Analysis

DOI: 10.1017/s0022109026103093

Authors: Xindi He, Ning Zhu

Institutions: Georgia Institute of Technology, Shanghai Jiao Tong University

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,550

OpenAlex ID: W7165040405

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