Asset Market Participation, Redistribution, and Asset Pricing
Francesco Saverio Gaudio,
Ivan Petrella and
Emiliano Santoro
No 17984, CEPR Discussion Papers from C.E.P.R. Discussion Papers
Abstract:
The dynamics of consumption inequality is important to understand asset pricing and its connection with the macroeconomy. We document marked heterogeneity in the transmission of different aggregate shocks to the consumption (and income) of U.S. assetholders relative to that of non-assetholders. Unlike technology shocks, factor-share shocks that redistribute resources from labor to capital income generate strong procyclicality in relative consumption, and are relevant drivers of time-variation in expected stock returns. A limited participation model rationalizing these findings highlights that asset prices mostly reflect risk stemming from redistribution between different income sources, which however has limited influence on macroeconomic fluctuations.
Keywords: Consumption; Income; Heterogeneity; Limited participation; Asset pricing (search for similar items in EconPapers)
JEL-codes: D31 E13 E21 E25 E32 E44 G12 G51 (search for similar items in EconPapers)
Date: 2023-03
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