Economic Policy Uncertainty and Stock Market Participation

50 Pages Posted: 26 Jul 2017 Last revised: 2 Mar 2019

See all articles by Eniko Gábor-Tóth

Eniko Gábor-Tóth

Deutsche Bundesbank; Central European University (CEU) - Department of Economics

Dimitris Georgarakos

European Central Bank (ECB) - Directorate General Research; Center for Financial Studies (CFS)

Multiple version iconThere are 2 versions of this paper

Date Written: February 2019

Abstract

Does economic policy uncertainty affect household stockholding? To answer this question we create a novel measure of household exposure to economic policy uncertainty news by combining survey information on the hours a household spends in reading newspapers and the frequency of such news in the popular press during a household’s pre-interview period. After controlling for household fixed effects, month-year fixed effects and time-varying cognitive skills, we find that households with more exposure to economic policy uncertainty news are less likely to invest in stocks directly or through mutual funds. This effect is independent from the VIX and household stock-price expectations.

Keywords: Economic Policy Uncertainty; Household Finance; Stockholding; Text Analysis

JEL Classification: D14, D81, G11

Suggested Citation

Gábor-Tóth, Eniko and Georgarakos, Dimitris, Economic Policy Uncertainty and Stock Market Participation (February 2019). Available at SSRN: https://ssrn.com/abstract=3006651 or http://dx.doi.org/10.2139/ssrn.3006651

Eniko Gábor-Tóth

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Central European University (CEU) - Department of Economics ( email )

Nador u. 9.
Budapest H-1051
Hungary

Dimitris Georgarakos (Contact Author)

European Central Bank (ECB) - Directorate General Research ( email )

Sonnemannstrasse 20
Frankfurt am Main, 60314
Germany

Center for Financial Studies (CFS) ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

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