Consuming Dividends

67 Pages Posted: 28 Oct 2019 Last revised: 28 May 2020

See all articles by Konstantin Bräuer

Konstantin Bräuer

Goethe University Frankfurt

Andreas Hackethal

Goethe University Frankfurt - Faculty of Economics and Business Administration; Leibniz Institute for Financial Research SAFE

Tobin Hanspal

WU Vienna University of Economics and Business

Date Written: May 2020

Abstract

This paper studies why investors buy dividend-paying assets and how they time their consumption accordingly. We combine administrative bank data linking customers’ consumption transactions and income to detailed portfolio data and survey responses on financial behavior. We find that private consumption is excessively sensitive to dividend income. Investors across wealth, income, and age distributions increase spending precisely around days of dividend receipt. Importantly, the consumption response is driven by financially prudent investors who select dividend portfolios, anticipate dividend income, and plan consumption accordingly. Our results contribute to the literature on a dividend clientele and provide evidence of ‘planned’ excess sensitivity.

Keywords: Consumption, Stock market wealth, Dividends, Excess sensitivity, Self-control, Household finance, Retail investors

JEL Classification: G50, G40, G11, G15, D12, D14, D15

Suggested Citation

Bräuer, Konstantin and Hackethal, Andreas and Hanspal, Tobin, Consuming Dividends (May 2020). SAFE Working Paper No. 280. Available at SSRN: https://ssrn.com/abstract=3466731 or http://dx.doi.org/10.2139/ssrn.3466731

Konstantin Bräuer

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Andreas Hackethal

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno Platz 3
Frankfurt am Main, 60323
Germany

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Tobin Hanspal (Contact Author)

WU Vienna University of Economics and Business ( email )

Welthandelsplatz 1 1
Wien, 1020
Austria

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