Abstract

http://ssrn.com/abstract=1354532
 
 

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The Wealth-Consumption Ratio


Hanno N. Lustig


UCLA - Anderson School of Management; National Bureau of Economic Research (NBER)

Stijn Van Nieuwerburgh


New York University Stern School of Business, Department of Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Adrien Verdelhan


Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

March 12, 2013

Review of Asset Pricing Studies, Forthcoming
NYU Working Paper No. FIN-08-045
AFA 2008 New Orleans Meetings Paper
EFA 2007 Ljubljana Meetings Paper

Abstract:     
We derive new estimates of total wealth, the returns on total wealth, and the wealth effect on consumption. We estimate the prices of aggregate risk from bond yields and stock returns using a no-arbitrage model. Using these risk prices, we compute total wealth as the price of a claim to aggregate consumption. We find that US households have a surprising amount of total wealth, most of it human wealth. This wealth is much less risky than stock market wealth. Events in long-term bond markets, not stock markets, drive most total wealth fluctuations. The wealth effect on consumption is small and varies over time with real interest rates.

Number of Pages in PDF File: 110

JEL Classification: E21, G10, G12

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Date posted: March 9, 2009 ; Last revised: March 31, 2013

Suggested Citation

Lustig, Hanno N. and Van Nieuwerburgh, Stijn and Verdelhan, Adrien, The Wealth-Consumption Ratio (March 12, 2013). NYU Working Paper No. FIN-08-045; Review of Asset Pricing Studies, Forthcoming; NYU Working Paper No. FIN-08-045; AFA 2008 New Orleans Meetings Paper ; EFA 2007 Ljubljana Meetings Paper . Available at SSRN: http://ssrn.com/abstract=1354532 or http://dx.doi.org/10.2139/ssrn.1354532

Contact Information

Hanno N. Lustig
UCLA - Anderson School of Management ( email )
405 Hilgard Avenue
Box 951361
Los Angeles, CA 90095
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Stijn Van Nieuwerburgh (Contact Author)
New York University Stern School of Business, Department of Finance ( email )
44 West 4th Street
Suite 9-190
New York, NY 10012-1126
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Adrien Verdelhan
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
77 Massachusetts Ave.
E62-416
Cambridge, MA 02142
United States
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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