Stock Market Returns and Consumption
55 Pages Posted: 29 Jan 2018 Last revised: 18 Apr 2021
There are 3 versions of this paper
Stock Market Returns and Consumption
Stock Market Returns and Consumption
Date Written: January 2018
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% for the bottom 50% of the wealth distribution and about 3% 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.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
