The Psychological Externalities of Investing : Evidence from Stock Returns and Crime

This paper investigates the psychological effects from stock market returns. Using a FBIdatabase of over 55 million daily reported crime incidents across the United States, crime isproposed as a measure of psychological well-being. The evidence suggests that stock returnsaffect not only the well-being of investors but also non-investors. Specifically, a contemporaneousnegative (positive) relationship between daily stock market returns and violent crime ratesis found for investors (non-investors). A similar relationship is also found between local earningssurprises and violent crime. The contrasting relationships for investors and non-investorssuggests that well-being may be influenced by relative wealth