Stock Market Returns and Consumption

By Marco Di Maggio, Amir Kermani, Kaveh Majlesi. Journal of Finance, 2020

132 citations recorded by the source corpus.

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 13 percent for the bottom 50% of the wealth distribution, but a flat 5 percent for the rest of the 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.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/c39b3859f553f53872dfe6f6a9f3418176102f1e

Citations in the corpus

• Consumer responses to the Covid‐19 crisis: evidence from bank account transaction data (2020, unknown): “This reflects that Danske Bank is a broad retail bank present in all parts of the country and catering to all types of customers.(10) We also provide a detailed breakdown of spending by detailed category and by sector, for which there are no available equivalents in government registers.”