Stock market returns and consumption
File(s)
Accepted version
Author(s)
DI MAGGIO, MARCO
KERMANI, AMIR
MAJLESI, KAVEH
Type
Journal Article
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.
Date Issued
2020-12
Date Acceptance
2019-08-19
Citation
The Journal of Finance, 2020, 75 (6), pp.3175-3219
ISSN
0022-1082
Publisher
Wiley
Start Page
3175
End Page
3219
Journal / Book Title
The Journal of Finance
Volume
75
Issue
6
Copyright Statement
© 2020 the American Finance Association
This is the peer reviewed version of the following article: DI MAGGIO, M., KERMANI, A. and MAJLESI, K. (2020), Stock Market Returns and Consumption. The Journal of Finance, 75: 3175-3219., which has been published in final form at https://doi.org/10.1111/jofi.12968. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited.
This is the peer reviewed version of the following article: DI MAGGIO, M., KERMANI, A. and MAJLESI, K. (2020), Stock Market Returns and Consumption. The Journal of Finance, 75: 3175-3219., which has been published in final form at https://doi.org/10.1111/jofi.12968. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited.
Identifier
http://dx.doi.org/10.1111/jofi.12968
Publication Status
Published
Date Publish Online
2020-08-10