When the Market Drives you Crazy: Stock Market Returns and Fatal Car Accidents
27 Pages Posted: 15 Oct 2018
Date Written: August 09, 2018
The stock market influences some of the most fundamental economic decisions of investors, such as consumption, saving, and labor supply, through the financial wealth channel. This pa-per provides evidence that daily fluctuations in the stock market have important - and hitherto neglected - spillover effects in another, unrelated domain, namely driving. Using the universe of fatal road car accidents in the United States from 1990 to 2015, we find that a one standard de- viation reduction in daily stock market returns is associated with a 0.5% increase in the number of fatal accidents. A battery of falsification tests support a causal interpretation of this finding. Our results are consistent with immediate emotions stirred by a negative stock market perfor-mance influencing the number of fatal accidents, in particular among inexperienced investors, thus highlighting the broader economic and social consequences of stock market fluctuations.
Keywords: stock market, car accidents, emotions
JEL Classification: D910, R410, G410
Suggested Citation: Suggested Citation