Abstract

http://ssrn.com/abstract=1946686
 


 



Consumption, Wealth, Stock and Government Bond Returns: International Evidence


Antonio Afonso


University of Lisbon - ISEG (School of Economics and Management); UECE (Research Unit on Complexity and Economics)

December 2011

The Manchester School, Vol. 79, Issue 6, pp. 1294-1232, 2011

Abstract:     
In this paper, we show, from the consumer's budget constraint, that the residuals of the trend relationship among consumption, aggregate wealth and labour income should predict both stock returns and government bond yields. We use data for several OECD countries and find that when agents expect future stock returns to be higher, they will temporarily allow consumption to rise. Regarding government bond yields, when bonds are seen as a component of asset wealth, then investors react in the same way. If, however, the increase in the yields is perceived as signalling a future rise in taxes, then they will temporarily reduce their consumption.

Number of Pages in PDF File: 29

Accepted Paper Series





Date posted: October 20, 2011  

Suggested Citation

Afonso, Antonio, Consumption, Wealth, Stock and Government Bond Returns: International Evidence (December 2011). The Manchester School, Vol. 79, Issue 6, pp. 1294-1232, 2011. Available at SSRN: http://ssrn.com/abstract=1946686 or http://dx.doi.org/10.1111/j.1467-9957.2011.02247.x

Contact Information

Antonio Afonso (Contact Author)
University of Lisbon - ISEG (School of Economics and Management) ( email )
R. Miguel Lupi, 20
Lisbon, 1248-078
Portugal
+351 21 392 5985 (Phone)
+351 21 396 6407 (Fax)
HOME PAGE: http://www.iseg.utl.pt/~aafonso/AAWeb.html
UECE (Research Unit on Complexity and Economics)
Rua Miguel Lupi 20
Lisbon, 1249-078
Portugal
+351-213 925 912 (Phone)
+351-213 971 196 (Fax)
HOME PAGE: http://www.iseg.utl.pt/~uece/
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