Skip to main content

Lund University Publications

LUND UNIVERSITY LIBRARIES

Stock Market Returns and Consumption

Majlesi, Kaveh LU ; Di Maggio, Marco and Kermani, Amir (2020) In Journal of Finance
Abstract
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 23 percent for the bottom 50% of the wealth distribution and about 3 percent for the top 30% of the wealth 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.
Please use this url to cite or link to this publication:
author
; and
organization
publishing date
type
Contribution to journal
publication status
in press
subject
in
Journal of Finance
publisher
Wiley-Blackwell
ISSN
0022-1082
language
English
LU publication?
yes
id
4844ca2a-b2fa-4395-9598-dc03325d9ea9
date added to LUP
2019-08-20 15:52:39
date last changed
2020-04-16 14:09:25
@article{4844ca2a-b2fa-4395-9598-dc03325d9ea9,
  abstract     = {{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 23 percent for the bottom 50% of the wealth distribution and about 3 percent for the top 30% of the wealth 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.}},
  author       = {{Majlesi, Kaveh and Di Maggio, Marco and Kermani, Amir}},
  issn         = {{0022-1082}},
  language     = {{eng}},
  publisher    = {{Wiley-Blackwell}},
  series       = {{Journal of Finance}},
  title        = {{Stock Market Returns and Consumption}},
  year         = {{2020}},
}