Consumption, wealth, stock and housing returns: Evidence from emerging markets

Guglielmo Maria Caporale and Ricardo Sousa

Research in International Business and Finance, 2016, vol. 36, issue C, 562-578

Abstract: We test the predictive ability of the transitory deviations of consumption from its common trend with aggregate wealth and labour income, cay, for both future equity and housing risk premia in emerging market economies. Using quarterly data for 31 markets, our country-level evidence shows that forecasting power of cay vis-à-vis stock returns is high for Brazil, China, Colombia, Israel, Korea, Latvia and Malaysia. As for housing returns, the empirical evidence suggests that financial and housing assets are perceived as complements in the case of Chile, Russia, South Africa and Thailand, and as substitutes in Argentina, Brazil, Hong Kong, Indonesia, Korea, Malaysia, Mexico and Taiwan. Using a panel econometric framework, we find that the cross-country heterogeneity observed in asset return predictability does not accrue to regional location, but can be attributed to differences in the degree of equity market development and in the level of income.

Keywords: Consumption; Wealth; Stock returns; Housing returns; Emerging markets (search for similar items in EconPapers)
JEL-codes: D12 E21 E44 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Related works:
Working Paper: Consumption, Wealth, Stock and Housing Returns: Evidence from Emerging Markets (2011)
Working Paper: Consumption, Wealth, Stock and Housing Returns: Evidence from Emerging Markets (2011)
Working Paper: Consumption, Wealth, Stock and Housing Returns: Evidence from Emerging Markets (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:36:y:2016:i:c:p:562-578

DOI: 10.1016/j.ribaf.2015.01.001

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