Firm Uncertainty and Household Spending

50 Pages Posted: 1 Oct 2020

See all articles by Iván Alfaro

Iván Alfaro

BI Norwegian Business School

Hoonsuk Park

University of Melbourne - Faculty of Business and Economics

Date Written: August 14, 2020


By mapping households to US employers traded in the stock market and using daily spending data, we provide novel evidence of household spending response to employer-specific forward-looking volatility shocks. A 10 percent change in firm uncertainty leads households to change their average monthly spending over the next 6-months by -0.95 percent. This negative second-moment firm uncertainty effect is larger than the positive first-moment effect of firm stock returns. The employer-specific effect is robust to both industry- and aggregate-level volatility effects. The intensity of the response increases in the forecast horizon window, lasting nine months. The response is pronounced for low-liquidity households, and for households that work at firms that recently had low employee growth, high CAPM Beta, and low Tobin's Q. Lastly, household spending shows an asymmetric response to `good' and `bad' uncertainty.

Keywords: Uncertainty, Households, Spending, Savings, Volatility

JEL Classification: D10, D80, E03, E21, E32, E44, G02, G30

Suggested Citation

Alfaro, Iván and Park, Hoonsuk, Firm Uncertainty and Household Spending (August 14, 2020). Available at SSRN: or

Iván Alfaro (Contact Author)

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442

Hoonsuk Park

University of Melbourne - Faculty of Business and Economics ( email )

Victoria, 3010

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