Employee output response to stock market wealth shocks

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

Journal of Financial Economics, 2022, vol. 146, issue 2, 779-796

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.

Keywords: Stock investment return; Stock market wealth; Consumption; Labor supply; Reference Dependence; Household Finance (search for similar items in EconPapers)
JEL-codes: D14 G12 G51 J22 J31 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:146:y:2022:i:2:p:779-796

DOI: 10.1016/j.jfineco.2021.11.005

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