@article{7b1a282c456840ac8c8cb98676f91728,
title = "Stock market returns and consumption",
abstract = "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 of 23% for the bottom 50% of the wealth distribution and about 3% for the top 30% of the wealth distribution. Household 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.",
author = "{Di Maggio}, Marco and Amir Kermani and Kaveh Majlesi",
note = "Funding Information: Marco Di Maggio is with Harvard Business School and NBER. Amir Kermani is with UC Berkeley and NBER. Kaveh Majlesi is with Lund University, Monash University, CEPR, IFN, and IZA. The data used in this paper come from the Swedish Interdisciplinary Panel (SIP) administered at the Centre for Economic Demography, Lund University, Sweden. We thank two anonymous referees, an Associate Editor, and the Editor, Stefan Nagel, for helpful comments that significantly improved the paper. We also thank Malcolm Baker; James Cloyne; Chris Carroll; Francesco D'Acunto; Samuel Hartzmark; Luigi Guiso; Matti Keloharju; Ralph Koijen; David Laibson; Geng Li; Jonathan Parker; Luigi Pistaferri; Larry Schmidt; Paolo Sodini; David Sraer; Stijn Van Nieuwerburgh; Gianluca Violante; Roine Vestman; Annette Vissing‐J{\o}rgensen; and seminar participants at the 2017 meeting of the Econometric Society, New York University Conference on Household Finance, CEPR Household Finance Workshop in Copenhagen, Helsinki Finance Summit, NBER SI Consumption Micro to Macro, MIT Sloan, UCSD, CREI and UPF, NY Fed, UC Berkeley, University of Zurich, SFS Cavalcade, the European Finance Association, and the Western Finance Association for helpful comments. We thank Terrance Odean for providing data from a large brokerage in the United States. Leonel Drukker and Erik Grenestam provided excellent research assistance. Kermani is grateful for research support from the Fisher center for Real Estate and Urban Economics and Majlesi acknowledges research support from Jan Wallanders and Tom Hedelius Foundation. Aside from these funding sources, all three authors have nothing to disclose with respect to disclosure policy. The Journal of Finance Publisher Copyright: {\textcopyright} 2020 the American Finance Association",
year = "2020",
month = dec,
doi = "10.1111/jofi.12968",
language = "English",
volume = "75",
pages = "3175--3219",
journal = "Journal of Finance",
issn = "0022-1082",
publisher = "Wiley-Blackwell",
number = "6",
}