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The stock market tips

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  • Uzmanoglu, Cihan

Abstract

We investigate the influence of public companies on their local economies through the spending of their employees on local goods and services. Using the taxicab industry in New York City as a laboratory, we find that tips paid for taxis taken near firms’ headquarters are higher on the days the firms’ stock returns are higher. This effect is short-lived, is stronger for firms offering greater stock-based compensation, and varies across industries. In addition, tipping increases gradually following the initial public offerings (IPOs) of firms, and this increase becomes significant at the end of the IPO lock-up period. Idiosyncratic stock returns are more strongly associated with tipping than are aggregate stock market or industry returns, suggesting that the increase in tipping with stock returns is due to firm-level factors. The number of taxis taken near firms’ headquarters, too, increases with their stock returns. Additional tests suggest that these findings are non-spurious.

Suggested Citation

  • Uzmanoglu, Cihan, 2022. "The stock market tips," Journal of Empirical Finance, Elsevier, vol. 67(C), pages 271-287.
    • Handle: RePEc:eee:empfin:v:67:y:2022:i:c:p:271-287
    DOI: 10.1016/j.jempfin.2022.04.002
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    More about this item

    Keywords

    Corporate headquarters location; Local economic activity; Discretionary spending; Stock market wealth effects;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G19 - Financial Economics - - General Financial Markets - - - Other
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • D10 - Microeconomics - - Household Behavior - - - General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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