Does Consumption Spending Respond to Daily Stock Market Returns?

Abstract

We investigate investors' spending responses to daily stock market returns using daily card transaction data in Seoul, South Korea. We document robust evidence of positive associations between daily card spending at karaoke lounges, pubs, and bars and stock market returns. We provide suggestive evidence that our findings are more consistent with the mental accounting framework. Our nonparametric analysis documents evidence of investors' loss aversion. We document little evidence of a gambling motive among investors. This study provides new evidence on investors' behavioural spending responses to stock market fluctuations.