Stuck on the Road: Traffic Congestion and Stock Returns

Abstract

Experimental research in psychology has found a strong negative association between traffic congestion and stress levels of commuters. Here, we investigate the consequences of morning traffic congestion on stock returns. Using traffic data and stock market returns from New York City and London, we find significant negative market returns associated with high-traffic days with returns on average lower 0.17–0.20% during unexpectedly bad traffic days. These results survive under many robustness tests. We evaluate two trading strategies relying on traffic conditions and find robust returns associated with these strategies. Our paper elicits a previously overlooked effect of traffic congestion on financial markets.