A suicide in your local neighborhood can stop you from buying stocks for several years, even if you never knew the person who died.
Local tragedies act as a financial contagion that fundamentally changes how people view the future. This shift isn't about immediate sadness, but a deeper change in cognitive beliefs about risk and reward. We assume that our investment decisions are based on national economic news or our personal bank accounts. This research shows that a community's social health is a major driver of how its citizens interact with the stock market. A single tragic event can suppress a whole town's economic participation for a long time.
The Spillover Effect of Negative Narratives on Household Financial Decisions: Evidence from Community Suicides
SSRN · 6730176
Narrative economics posits that viral narratives drive economic fluctuations, yet causal micro-level evidence remains limited. Exploiting community suicides as exogenous narrative shocks, we investigate their spillover effects on household stock market participation using data from the China Household Finance Survey (2013--2021). Results show that exposure to community suicides reduces the probability of participation by 1.7 percentage points (a 10.6% relative decline), and this effect persists