Economic policy uncertainty and stock market participation

  • Does economic policy uncertainty affect household stockholding? To answer this question we create a novel measure of household exposure to economic policy uncertainty news by combining survey information on the hours a household spends in reading newspapers and the frequency of such news in the popular press during a household’s pre-interview period. After controlling for household fixed effects, month-year fixed effects and time-varying cognitive skills, we find that households with a higher exposure to economic policy uncertainty news are less likely to invest in stocks held directly or through mutual funds. This effect is independent from the market volatility index and household (first-moment) expectations about the stock market index.

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Author:Enikö Gábor-Tóth, Dimitris Georgarakos
Parent Title (English):[Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 590]
Series (Serial Number):CFS working paper series (590)
Publisher:Center for Financial Studies
Place of publication:Frankfurt, M.
Document Type:Working Paper
Year of Completion:2018
Year of first Publication:2018
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2018/03/13
Tag:economic policy uncertainty; household finance; stockholding; text analysis
Issue:21 February 2018
Page Number:44
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht