How much does the stock market affect tipping in a cab ride?
Cihan Uzmanoglu, Zurack professor of finance and economics at Binghamton University, examines this relationship.
Dr. Uzmanoglu holds the distinguished position of Zurack Professor of Finance and Economics at Binghamton University. His research addresses questions related to credit markets, financial institutions, fixed-income securities, and corporate finance. He has investigated a variety of topics including the real effects of financial innovations, the influence of institutional investors on corporate debt policies, the impact of COVID-19 lockdowns on the municipal bond market, and the relationship between cities’ climate risk exposures and their credit ratings and cost of borrowing.
Dr. Uzmanoglu has a bachelor’s degree in Engineering from Yildiz Technical University in Turkey, an MBA degree from the University of Texas at Dallas, and a doctorate in Finance from the Louisiana State University. He is also a Chartered Financial Analyst (CFA) since 2011, exemplifying his commitment to professional excellence and ongoing development in the field.
The Stock Market Tips
Every New Yorker has probably been in the back seat of a taxi. It’s an iconic emblem of the city, and for many, it’s a part of their day-to-day life. What passengers might have never considered is that their tip means a lot more and goes a lot further than the ride itself.
When looking at the economy on a local scale, the taxi setting offers a unique opportunity to understand how companies influence their local economies. Tipping for taxis is voluntary and it is unlikely to influence future service quality. Therefore, taxi tips can give us clues about the discretionary spending behavior of employees on local goods and services.
I analyzed around 2 million rides in New York City, and what I found was quite interesting. On days when the stock returns of a firm are higher, the tips paid for taxis taken near the firm’s headquarters location are also higher. However, tipping does not decline with negative stock returns. This asymmetrical relationship could be because the minimum tip is bounded by social norms.
The results of several additional tests suggest that these findings are indeed associated with the stock market performances of companies. For instance, the further you get away from the physical locations of companies, the tipping effect decays, and during the day, it is most pronounced at the end of regular work hours.
You might ask: why is this research so important? This study indicates that the stock performance of a firm can influence the discretionary spending of its employees on local goods and services. It’s a closer look at the relationship between businesses and the community around them. These insights open up possibilities for further research into understanding the spillover effects of financial markets on individual spending.
