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Employee output response to stock market wealth shocks

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  • Li, Teng
  • Qian, Wenlan
  • Xiong, Wei A.
  • Zou, Xin

Abstract

This paper uses individual-level data linking stock investments with work performance to examine how changes in stock market wealth affect worker output. We document that a 10% increase in monthly income from stock market investments is associated with a decrease of 3.8% in the same investor's next-month work output. The negative output response is not driven by concurrent economic conditions and is unexplained by investor-specific liquidity needs. Consistent with the reference dependence interpretation, the response is short-lived and the effect is stronger when the total income has reached a reference income. Overall, our results highlight a novel channel of transmitting stock market fluctuation through labor supply.

Suggested Citation

  • Li, Teng & Qian, Wenlan & Xiong, Wei A. & Zou, Xin, 2022. "Employee output response to stock market wealth shocks," Journal of Financial Economics, Elsevier, vol. 146(2), pages 779-796.
    • Handle: RePEc:eee:jfinec:v:146:y:2022:i:2:p:779-796
    DOI: 10.1016/j.jfineco.2021.11.005
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    More about this item

    Keywords

    Stock investment return; Stock market wealth; Consumption; Labor supply; Reference Dependence; Household Finance;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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