Dynamic Spending Responses to Wealth Shocks: Evidence from Quasi-Lotteries on the Stock Market

Asger Lau Andersen, Niels Johannesen and Adam Sheridan

No 9184, CESifo Working Paper Series from CESifo

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; permanent income hypothesis (search for similar items in EconPapers)
Date: 2021
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.cesifo.org/DocDL/cesifo1_wp9184.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:ces:ceswps:_9184

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().