Dynamic Spending Responses to Wealth Shocks: Evidence from Quasi-lotteries on the Stock Market
Asger Lau Andersen,
Niels Johannesen and
Adam Sheridan
Additional contact information
Asger Lau Andersen: University of Copenhagen and CEBI
Adam Sheridan: University of Copenhagen and CEBI
No 21-11, CEBI working paper series from University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI)
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 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.
Keywords: wealth shocks; household consumption; marginal propensity to consume; stock markets; permanent income hypothesis (search for similar items in EconPapers)
JEL-codes: D12 E21 G51 (search for similar items in EconPapers)
Pages: 45
Date: 2021-07-06
New Economics Papers: this item is included in nep-fmk and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)
Downloads: (external link)
https://www.econ.ku.dk/cebi/publikationer/working-papers/CEBI_WP_11-21.pdf (application/pdf)
Related works:
Working Paper: Dynamic Spending Responses to Wealth Shocks: Evidence from Quasi-Lotteries on the Stock Market (2021) 
Working Paper: Dynamic Spending Responses to Wealth Shocks: Evidence from Quasi-lotteries on the Stock Market (2021) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:kud:kucebi:2111
Access Statistics for this paper
More papers in CEBI working paper series from University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI) Oester Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark. Contact information at EDIRC.
Bibliographic data for series maintained by Thomas Hoffmann ().