Economic Policy Uncertainty and Stock Market Participation

44 Pages Posted: 26 Jul 2017 Last revised: 22 Feb 2018

Enikö Gábor

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

Dimitris Georgarakos

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

Multiple version iconThere are 2 versions of this paper

Date Written: July 21, 2017

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 a higher exposure to economic policy uncertainty news are less likely to invest in stocks held directly or through mutual funds. This effect is independent from the market volatility index and household (first-moment) expectations about the stock market index.

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

JEL Classification: D14, D81, G11

Suggested Citation

Gábor, Enikö and Georgarakos, Dimitris, Economic Policy Uncertainty and Stock Market Participation (July 21, 2017). Available at SSRN: https://ssrn.com/abstract=3006651 or http://dx.doi.org/10.2139/ssrn.3006651

Enikö Gábor

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

University of Leicester ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom

Center for Financial Studies (CFS) ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
131
rank
148,760
Abstract Views
392
PlumX