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The Spirit of Capitalism and Stock-Market Prices

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  • Gurdip S. Bakshi

    (Department of Economics and Finance, University of New Orleans
    University of Maryland)

  • Zhiwu Chen

    (Fisher College of Business, Ohio State University)

Abstract

In 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.

Suggested Citation

  • Gurdip S. Bakshi & Zhiwu Chen, 1996. "The Spirit of Capitalism and Stock-Market Prices," CEMA Working Papers 511, China Economics and Management Academy, Central University of Finance and Economics.
    • Handle: RePEc:cuf:wpaper:511
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    References listed on IDEAS

    as
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    More about this item

    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; Trading Volume; Bond Interest Rates

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