Stock Market Returns and Consumption
(2020) In Journal of Finance 75(6). p.3175-3219- 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 of 23% for the bottom 50% of the wealth distribution and about 3% for the top 30% of the wealth distribution. Household 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:
https://lup.lub.lu.se/record/b83134c5-ab9b-4628-a810-071e3adfe503
- author
- Di Maggio, Marco ; Kermani, Amir and Majlesi, Kaveh LU
- organization
- publishing date
- 2020
- type
- Contribution to journal
- publication status
- published
- subject
- in
- Journal of Finance
- volume
- 75
- issue
- 6
- pages
- 45 pages
- publisher
- Wiley-Blackwell
- external identifiers
-
- scopus:85089195968
- ISSN
- 0022-1082
- DOI
- 10.1111/jofi.12968
- language
- English
- LU publication?
- yes
- id
- b83134c5-ab9b-4628-a810-071e3adfe503
- date added to LUP
- 2021-01-07 13:58:42
- date last changed
- 2022-07-06 04:31:12
@article{b83134c5-ab9b-4628-a810-071e3adfe503, abstract = {{<p>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 of 23% for the bottom 50% of the wealth distribution and about 3% for the top 30% of the wealth distribution. Household 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.</p>}}, author = {{Di Maggio, Marco and Kermani, Amir and Majlesi, Kaveh}}, issn = {{0022-1082}}, language = {{eng}}, number = {{6}}, pages = {{3175--3219}}, publisher = {{Wiley-Blackwell}}, series = {{Journal of Finance}}, title = {{Stock Market Returns and Consumption}}, url = {{http://dx.doi.org/10.1111/jofi.12968}}, doi = {{10.1111/jofi.12968}}, volume = {{75}}, year = {{2020}}, }