Celebrity deaths and social mood:

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Psychology studies have showed that current mood can influence risky decision making. When the mood of a large part of the society (i.e. the social mood) is affected in a similar direction, this is then expected to affect the willingness of people to invest in risky assets. In this paper the death of a beloved celebrity will be used as indicator of a negative shock in social mood. Because psychological research found that people feel that they are emotionally connected with celebrities, and celebrity deaths are able to create public mourning, celebrity deaths are expected to provoke a single negative emotion in society: sadness, which is felt in the grieving process after a beloved celebrity dies. The celebrity death effect is tested on the daily returns of large cap stock indexes and small cap stock indexes of the United Kingdom, the Netherlands, and Germany. Using a sample of 443 celebrity deaths over the period 1986-2015, I find a significant positive celebrity death effect on stock returns. The celebrity death effect is best captured on the returns of small cap stocks. The size of the effect on these returns is increasing with the popularity of the celebrity in question. Furthermore, the effect is larger for ‘popular’ celebrities who died from a sudden death.
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