Resurrecting the Wealth Effect on Consumption: Further Analysis and Extension

30 Pages Posted: 1 Jun 2007

See all articles by Nicholas Apergis

Nicholas Apergis

University of Piraeus; University of Derby

Stephen M. Miller

University of Nevada, Las Vegas - Department of Economics; University of Connecticut - Department of Economics

Date Written: October 2006

Abstract

This paper investigates whether various components of wealth affects real consumption asymmetrically through a threshold adjustment model. The empirical findings for the U.S. show that stock market assets, financial assets (with stock market included), and household net assets exert a practical wealth effect on consumption expenditure. By contrast, financial assets, excluding stock market assets, tangible assets, total assets, and Lettau-Ludvigson measure of net assets do not exert a wealth effect on consumption expenditure. Moreover, the empirical findings favor the presence of an asymmetric effect on real consumption for the former cases, with negative 'news' affecting consumption less than positive 'news'.

Keywords: Consumption, Stock market, Wealth effect, Asymmetry

JEL Classification: E21, E44

Suggested Citation

Apergis, Nicholas and Miller, Stephen M., Resurrecting the Wealth Effect on Consumption: Further Analysis and Extension (October 2006). Available at SSRN: https://ssrn.com/abstract=990256 or http://dx.doi.org/10.2139/ssrn.990256

Nicholas Apergis

University of Piraeus ( email )

Karaoli and Dimitriou 80
80 KARAOLI & DIMITRIOU STREET
Piraeus, Attiki 18534
Greece

University of Derby ( email )

Kedleston Road
Derby, Derbyshire DE22 1GB
United Kingdom

Stephen M. Miller (Contact Author)

University of Nevada, Las Vegas - Department of Economics ( email )

4505 S. Maryland Parkway
Box 456005
Las Vegas, NV 89154
United States
702-895-3776 (Phone)
702-895-1354 (Fax)

HOME PAGE: http://faculty.unlv.edu/smiller/

University of Connecticut - Department of Economics

365 Fairfield Way, U-1063
Storrs, CT 06269-1063
United States

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