Consumption, Wealth, Stock And Government Bond Returns: International Evidence
AbstractIn this paper, we show, from the consumerâs budget constraint, that the residuals of the trend relationship among consumption, aggregate wealth, and labour income should predict both stock returns and government bond yields. We use data for several OECD countries and find that when agents expect future stock returns to be higher, they will temporarily allow consumption to rise. Regarding government bond yields, when bonds are seen as a component of asset wealth, then investors react in the same way. If, however, the increase in the yields is perceived as signalling a future rise in taxes, then they will temporarily reduce their consumption.
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Bibliographic InfoArticle provided by University of Manchester in its journal The Manchester School.
Volume (Year): 79 (2011)
Issue (Month): 6 (December)
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Other versions of this item:
- António Afonso & Ricardo M. Sousa, 2011. "Consumption, Wealth, Stock and Government Bond Returns: International Evidence," Working Papers Department of Economics 2011/09, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
- António Afonso & Ricardo M. Sousa, 2011. "Consumption, Wealth, Stock and Government Bond Returns: International Evidence," NIPE Working Papers 09/2011, NIPE - Universidade do Minho.
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ricardo M. Sousa, 2009. "What Are The Wealth E¤ects Of Monetary Policy?," NIPE Working Papers 26/2009, NIPE - Universidade do Minho.
- Goodness C. Aye & Rangan Gupta & Mampho P. Modise, 2012. "Do Stock Prices Impact Consumption and Interest Rate in South Africa? Evidence from a Time-Varying Vector Autoregressive Model," Working Papers 201224, University of Pretoria, Department of Economics.
- Ren, Yu & Yuan, Yufei & Zhang, Yang, 2014. "Human capital, household capital and asset returns," Journal of Banking & Finance, Elsevier, vol. 42(C), pages 11-22.
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