Consuming Dividends

104 Pages Posted: 28 Oct 2019 Last revised: 6 Nov 2021

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; Vienna Graduate School of Finance (VGSF)

Date Written: October 31, 2021

Abstract

This paper studies why investors buy dividend-paying assets and how they time consumption accordingly. We combine administrative bank data linking customers’ consumption and income to 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. Our results are at odds with a number of existing rational and behavioral explanations such as financial constraints and impulsiveness. Instead, consumption responses reflect ‘planned’ excess sensitivity, driven by investors who select dividend portfolios, anticipate dividend income, and plan consumption accordingly.

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 (October 31, 2021). 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 )

Theodor-W.-Adorno-Platz 3
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

Vienna Graduate School of Finance (VGSF) ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

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