Consumption, Wealth and Expected Stock Returns in Australia

14 Pages Posted: 19 Dec 2004

See all articles by Lance A. Fisher

Lance A. Fisher

Macquarie University - Department of Economics; Macquarie University, Macquarie Business School

Graham M. Voss

University of Victoria - Department of Economics

Abstract

The present paper investigates the relationship between consumption, labour income and household wealth in Australia within the inter-temporal consumption framework developed by Lettau and Ludvigson (2001). We first test for a long-run relationship among these series and then investigate whether private dissaving, measured as the deviation from the estimated relationship, has information content for future stock returns. We find that private dissaving has predictive power for quarterly returns on the ASX200 and for returns over long holding periods. The recent substantial decline in private dissaving suggests that consumers view the recent surge in non-financial wealth as transitory and expect a correction.

Suggested Citation

Fisher, Lance A. and Voss, Graham M., Consumption, Wealth and Expected Stock Returns in Australia. Available at SSRN: https://ssrn.com/abstract=629402

Lance A. Fisher (Contact Author)

Macquarie University - Department of Economics ( email )

Sydney NSW 2109
Australia

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

Graham M. Voss

University of Victoria - Department of Economics ( email )

Victoria V8W Y2Y, BC
Canada

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