Economic Policy Uncertainty and Stock Market Participation

47 Pages Posted: 16 Mar 2018

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 21, 2018

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: D14, D81, G11

JEL Classification: Economic policy uncertainty, household finance, stockholding, text analysis

Suggested Citation

Gábor-Tóth, Eniko and Georgarakos, Dimitris, Economic Policy Uncertainty and Stock Market Participation (February 21, 2018). CFS Working Paper, No. 590. Available at SSRN: https://ssrn.com/abstract=3139007 or http://dx.doi.org/10.2139/ssrn.3139007

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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