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When the Market Drives You Crazy

Stock Market Returns and Fatal Car Accidents

Corrado Giulietti, Mirco Tonin and Michael Vlassopoulos

CESifo Group Munich, 2018

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According to the US National Safety Council, more than 40,000 Americans died as a result of vehicular accidents in 2017, largely due to drunk, distracted or unbuckled drivers. However, a seemingly obscure rationale could also factor into these casualties. Economists Corrado Giulietti, Mirco Tonin and Michael Vlassopoulos investigate a curious uptick in motor vehicle fatalities following declines in daily equity returns. Investors will find this academic report a fascinating examination of the role of emotion in stock markets.

Take-Aways

Every year, at least 1.2 million people die in road accidents, according to the World Health Organization, while in the United States, vehicle crashes cost the economy a total of $242 billion in 2010.
While impaired and distracted driving causes many fatal crashes, a decrease in the equity markets also leads to an increase in road fatalities.
Using US data from 1990 to 2015 and adjusting for environmental and weather effects, analysts discern that “a one standard deviation reduction in daily stock market returns increases the number of fatal accidents by 0.5%.”

About the Authors

Corrado Giulietti and Michael Vlassopoulos are economists at the University of Southampton in England. Mirco Tonin is an economics professor at the Free University of Bozen-Bolzano in Italy.

When the Market Drives You Crazy

Stock Market Returns and Fatal Car Accidents

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