Bank Deposits and the Stock Market

Review of Financial Studies, Forthcoming

55 Pages Posted: 15 Jun 2017 Last revised: 22 Apr 2019

See all articles by Leming Lin

Leming Lin

University of Pittsburgh - Katz Graduate School of Business

Date Written: April 18, 2019


I show that households' demand for retail deposits decreases during stock market booms, which induces a contraction in bank lending and a decrease in real activity at bank-dependent firms. I identify this channel using geographic heterogeneity in households' stock market participation. Banks in areas with greater stock ownership see a greater reduction in deposit growth when stock returns are high. This holds even across branches of the same bank, and across zip codes within counties. Counties served by banks financed by more stock-active depositors see a greater decline in bank lending and bank-dependent-firm employment following high stock returns.

Keywords: Deposits, loans, stock market, returns, sentiment, employment, real effects, banks

JEL Classification: G21, G11, G40

Suggested Citation

Lin, Leming, Bank Deposits and the Stock Market (April 18, 2019). Review of Financial Studies, Forthcoming, Available at SSRN: or

Leming Lin (Contact Author)

University of Pittsburgh - Katz Graduate School of Business ( email )

346 Mervis Hall
University of Pittsburgh
Pittsburgh, PA 15260
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
PlumX Metrics