Good Days, Bad Days: Stock Market Fluctuation and Taxi Tipping Decisions

61 Pages Posted: 27 Apr 2020

See all articles by Weiqiang Tan

Weiqiang Tan

Hong Kong Baptist University (HKBU)

Jian Zhang

The University of Hong Kong - Faculty of Business and Economics; The University of Hong Kong - Faculty of Business and Economics

Date Written: November 1, 2017

Abstract

Using taxicab tipping records in New York City (NYC), we develop a novel measure of real-time utility and quantitatively assess the impact of wealth change on the well-being of individuals based on the core tenet of prospect theory. The baseline estimate suggests that a one standard deviation increase in the stock market index is associated with a 0.3% increase in the daily average tipping ratio, which translates to an elasticity estimate of 0.3. The impact is short-lived and in line with the wealth effect interpretation. Consistent with loss aversion, we find that the impact is primarily driven by wealth loss rather than gain. We exploit GPS and timestamp information and design two difference-in-difference tests to establish causal inference. Exploitation of the characteristics of individual stocks suggests that the effect of wealth change on real-time utility is more pronounced in the stocks of firms with large market capitalization. Finally, our aggregate estimate suggests that annual tip revenue in the NYC taxi industry is associated with stock market fluctuation, ranging from -$17.5 million to $12.9 million.

Keywords: Consumption, Stock market, Loss aversion, Investor mood, Taxi tipping

JEL Classification: D12; D91; G12

Suggested Citation

Tan, Weiqiang and Zhang, Jian and Zhang, Jian, Good Days, Bad Days: Stock Market Fluctuation and Taxi Tipping Decisions (November 1, 2017). Available at SSRN: https://ssrn.com/abstract=3565633 or http://dx.doi.org/10.2139/ssrn.3565633

Weiqiang Tan

Hong Kong Baptist University (HKBU)

Department of Economics
Kowloon, Hong Kong
Hong Kong

Jian Zhang (Contact Author)

The University of Hong Kong - Faculty of Business and Economics ( email )

Faculty of Business and Econoics
Pokfulam Road
Hong Kong
Hong Kong

The University of Hong Kong - Faculty of Business and Economics ( email )

Faculty of Business and Econoics
Pokfulam Road
Hong Kong
Hong Kong

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