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Stock Market Volatility, Consumption and Investment; An Evaluation of the Uncertainty Hypothesis Using Post-War U.S. Data

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Abstract

We estimate the effects of stock market volatility on the growth rates of durable consumption, non-durable consumption and invest- ment using post-war US data. Our results indicate that high levels of stock market volatility exert large adverse effects on the growth rates of investment and durable consumption, whereas the in uence on non-durable consumption growth is rather limited. The ordering of the magnitudes of the effects of stock market volatility across the three components of aggregate demand supports the idea that stock mar- ket volatility is closely related to uncertainty about future economic developments.

Suggested Citation

  • Burkhard Raunig & Johann Scharler, 2011. "Stock Market Volatility, Consumption and Investment; An Evaluation of the Uncertainty Hypothesis Using Post-War U.S. Data," Working Papers 168, Oesterreichische Nationalbank (Austrian Central Bank).
    • Handle: RePEc:onb:oenbwp:168
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    Cited by:

    1. Ramiz Rahmanov, 2013. "Stock Market Wealth Effects in Emerging Economies of Eastern Europe: Evidence from Russia and Ukraine," Research in Economics and Business: Central and Eastern Europe, Tallinn School of Economics and Business Administration, Tallinn University of Technology, vol. 5(1).
    2. Gabriel P. Mathy, 2020. "How much did uncertainty shocks matter in the Great Depression?," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 14(2), pages 283-323, May.
    3. Bhupal Singh, 2022. "Housing and stock market wealth effects in developing economies," International Economics and Economic Policy, Springer, vol. 19(1), pages 29-49, February.
    4. Ahmed Al Samman & Mahmoud Moustafa Otaify, 2017. "How Does Volatility of Characteristics-sorted Portfolios Respond to Macroeconomic Volatility?," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 300-315.

    More about this item

    Keywords

    uncertainty hypothesis; stock market volatility; consumption; investment;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)

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