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Stock Market Returns and Consumption

In English

Författare

Summary, in English

This paper employs Swedish data on households' stock holdings to investigate how consumption responds to changes in stock market returns. We instrument the actual capital gains and dividend payments with past portfolio weights. Unrealized capital gains lead to a marginal propensity to consume (MPC) of 13 percent for the bottom 50% of the wealth distribution, but a flat 5 percent for the rest of the distribution. Households' consumption is significantly more responsive to dividend payouts across all parts of the wealth distribution. Our findings are consistent with households treating capital gains and dividends as separate sources of income.

Publiceringsår

2018

Språk

Engelska

Publikation/Tidskrift/Serie

Working Papers

Issue

2018:1

Dokumenttyp

Working paper

Förlag

Department of Economics, Lund University

Ämne

  • Economics

Nyckelord

  • Capital gain
  • Dividend income
  • Consumption
  • Near-rational behavior
  • D14
  • E21
  • G12

Status

Published