Dynamic Spending Responses to Wealth Shocks: Evidence from Quasi-lotteries on the Stock Market
Research output: Working paper › Research
Documents
- CEBI_WP_11-21
Final published version, 804 KB, PDF document
How much and over what horizon do households adjust their consumption in response to stock market wealth shocks? We address these questions using granular data on spending and stock portfolios from a large bank and exploiting lottery-like variation in gains across investors with similar portfolio characteristics. Consistent with the permanent income hypothesis, spending responses to stock market gains are immediate and persistent. The responses cumulate to a marginal propensity to consume of around 4% over a one-year horizon. The estimates differ substantially by household liquidity, but not by financial attention, as measured by the frequency of account logins.
Original language | English |
---|---|
Number of pages | 43 |
Publication status | Published - 2021 |
Series | CEBI Working Paper Series |
---|---|
Number | 11 |
Volume | 21 |
Number of downloads are based on statistics from Google Scholar and www.ku.dk
No data available
ID: 288342154