John R. Huck

Research:

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

This paper investigates the psychological effects from stock market returns. Using a FBI database of over 55 million daily reported crime incidents across the United States, crime is proposed as a measure of psychological well-being. The evidence suggests that stock returns affect not only the well-being of investors but also non-investors. Specifically, a contemporaneous negative (positive) relationship between daily stock market returns and violent crime rates is found for investors (non-investors). A similar relationship is also found between local earnings surprises and violent crime. The contrasting relationships for investors and non-investors suggests that well-being may be influenced by relative wealth.

Does Crime Pay? Asset Pricing with Revealed Utility of Heterogeneous Consumers

I propose violent crime growth as a measure of revealed marginal utility growth of heterogeneous consumers in incomplete markets.  Consumer heterogeneity is measured using the cross-sectional average and cross-sectional variance of crime growth exploiting a monthly panel of reported crime incidents from over 10,000 law enforcement agencies across the United States from 1975-2012.  Consistent with heterogeneous consumer models such as Mankiw (1986), I find that the cross-sectional average and variance of violent crime growth can explain the cross-section of stock returns.  Specifically, investors pay a premium for assets that have higher betas to the violent crime growth moments.