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Public reaction to stock market volatility: evidence from the ATUS

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  • Patrick Payne
  • Christopher Browning
  • Charlene M. Kalenkoski

Abstract

How does the public react to changes in the stock market? We know from the existing body of research that sentiment can predict future stock-market movements. However, do market movements affect sentiment? This article addresses these questions by testing whether market movements precede changes in the emotional well-being of the general public. Using Granger causality analysis, we compare how market movements affect public well-being during periods of increased (2010) and decreased (2012) volatility. The results show that 30-day-lagged returns are associated positively and significantly with the public’s emotional well-being, and that this effect is stronger during periods of increased volatility. The results also show that this effect may persist for up to 120 days.

Suggested Citation

  • Patrick Payne & Christopher Browning & Charlene M. Kalenkoski, 2016. "Public reaction to stock market volatility: evidence from the ATUS," Applied Economics Letters, Taylor & Francis Journals, vol. 23(17), pages 1197-1200, November.
    • Handle: RePEc:taf:apeclt:v:23:y:2016:i:17:p:1197-1200
    DOI: 10.1080/13504851.2016.1142651
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    Cited by:

    1. Sarah Asebedo & Patrick Payne, 2019. "Market Volatility and Financial Satisfaction: The Role of Financial Self-Efficacy," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 20(1), pages 42-52, January.

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