Consumption, Wealth, Stock and Housing Returns: Evidence from Emerging Markets

Guglielmo Maria Caporale and Ricardo Sousa

No 32/2011, NIPE Working Papers from NIPE - Universidade do Minho

Abstract: In this paper, we show, using the consumer’s budget constraint, that the residuals of the trend relationship among consumption, aggregate wealth, and labour income should predict both stock returns and housing returns. We use quarterly data for a panel of 31 emerging economies and find that, when agents expect future stock returns to be higher, they will temporarily allow consumption to rise. Regarding housing returns, if housing assets are complementary to stocks, then investors react in the same way. If, however, the increase in the exposure through risky assets is achieved by lowering the share of wealth held in the form of housing (i.e., when stock and housing assets are substitutes), then they will temporarily reduce their consumption.

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: 2011
New Economics Papers: this item is included in nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Journal Article: Consumption, wealth, stock and housing returns: Evidence from emerging markets (2016)
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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