Wealth-to-income ratio and stock returns: evidence from the Euro Area
AbstractI find that when the ratio of asset wealth to human wealth falls, investors become more exposed to labour income shocks and demand a higher risk premium for stocks. I show that the residuals of the trend relationship among wealth and labour income, wy , predict future stock returns in the Euro Area. The results are robust to additional control variables and show the superiority of wy vis-a-vis other benchmark models.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics Letters.
Volume (Year): 19 (2012)
Issue (Month): 7 (May)
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- 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.
- Fredj Jawadi & Ricardo M. Sousa, 2012.
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NIPE Working Papers, NIPE - Universidade do Minho
23/2012, NIPE - Universidade do Minho.
- Fredj Jawadi & Ricardo M. Sousa, 2013. "Modelling money demand: further evidence from an international comparison," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 20(11), pages 1052-1055, July.
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