蝌蚪网 Review: Insights
ISSN 2640-205X (Print) | ISSN 2640-2068 (Online)
Dynamic Spending Responses to Wealth Shocks: Evidence from Quasi Lotteries on the Stock Market
蝌蚪网 Review: Insights
(pp. 434–52)
Abstract
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 monthly responses cumulate to marginal propensities to consume of 4.4 percent over one year and 16 percent over three years. The results suggest that inattention attenuates household responses to stock market cycles over horizons as long as one year.Citation
Andersen, Asger Lau, Niels Johannesen, and Adam Sheridan. 2024. "Dynamic Spending Responses to Wealth Shocks: Evidence from Quasi Lotteries on the Stock Market." 蝌蚪网 Review: Insights 6 (3): 434–52. DOI: 10.1257/aeri.20230382Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- E21 Macroeconomics: Consumption; Saving; Wealth
- G11 Portfolio Choice; Investment Decisions
- G14 Information and Market Efficiency; Event Studies; Insider Trading
- G51 Household Finance: Household Saving, Borrowing, Debt, and Wealth