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When the Market Drives You Crazy: Stock Market Returns and Fatal Car Accidents

Author

Listed:
  • Giulietti, Corrado

    () (University of Southampton)

  • Tonin, Mirco

    () (Free University of Bozen/Bolzano)

  • Vlassopoulos, Michael

    () (University of Southampton)

Abstract

The stock market influences some of the most fundamental economic decisions of investors, such as consumption, saving, and labor supply, through the financial wealth channel. This paper provides evidence that daily fluctuations in the stock market have important - and hitherto neglected - spillover effects in another, unrelated domain, namely driving. Using the universe of fatal road car accidents in the United States from 1990 to 2015, we find that a one standard deviation reduction in daily stock market returns is associated with a 0.5% increase in the number of fatal accidents. A battery of falsification tests support a causal interpretation of this finding. Our results are consistent with immediate emotions stirred by a negative stock market performance influencing the number of fatal accidents, in particular among inexperienced investors, thus highlighting the broader economic and social consequences of stock market fluctuations.

Suggested Citation

  • Giulietti, Corrado & Tonin, Mirco & Vlassopoulos, Michael, 2018. "When the Market Drives You Crazy: Stock Market Returns and Fatal Car Accidents," IZA Discussion Papers 11720, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp11720
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    References listed on IDEAS

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    More about this item

    Keywords

    stock market; car accidents; emotions;

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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