How Does the Spirit of Capitalism Affect Stock Market Prices?
Year: 2001
Type: article
Abstract: Bakshi and Chen (1996b) suggest that the spirit of capitalism affects stock prices by increasing society’s aversion to risk. In this article, I show that the way in which the spirit of capitalism impinges upon asset prices depends on the interaction of impatience, willingness to substitute over time, and ordinal preferences between consumption and status, in addition to risk aversion. I develop a general model that charts the channels through which the spirit of capitalism affects asset prices. An increase in the capitalist spirit may increase or decrease risk aversion, and may actually decrease the prices of risky assets.
Source: Review of Financial Studies
Author: William T. Smith
Institution: University of Memphis
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2149841258