The Spirit of Capitalism and Stock-Market Prices
AbstractIn existing theory, wealth is no more valuable than its implied consumption rewards. In reality investors acquire wealth not just for its implied consumption, but for the resulting social status. Max M. Weber refers to this desire for wealth as the spirit of capitalism. We examine, both analytically and empirically, implications of Weber's hypothesis for consumption, savings, and stock prices. When investors care about relative social status, propensity to consume and risktaking behavior wvildl epend on social standards, and stock prices will be volatile. The spirit of capitalism seems to be a driving force behind stock-market volatility and economic growth.
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Bibliographic InfoPaper provided by China Economics and Management Academy, Central University of Finance and Economics in its series CEMA Working Papers with number 511.
Length: 26 pages
Date of creation: 1996
Date of revision:
Publication status: Published in The American Economic Review, Vol. 86, No. 1 (Mar., 1996), pp. 133-157
Find related papers by JEL classification:
- G1 - Financial Economics - - General Financial Markets
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
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