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The Consumption of Stockholders and Non-Stockholders

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  • N. Gregory Mankiw
  • Stephen P. Zeldes

Abstract

Only one-fourth of U.S. families own stock. This paper examines whether the consumption of stockholders differs from the consumption of non-stockholders and whether these differences help explain the empirical failures of the consumption-based CAPM. Household panel data are used to construct time series on the consumption of each group. The results indicate that the consumption of stockholders is more volatile than that of non-stockholders and is more highly correlated with the excess return on the stock market. These differences help explain the size of the equity premium, although they do not fully resolve the equity premium puzzle.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3402.

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Date of creation: Jul 1990
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Publication status: published as Journal of Financial Economics, Vol. 27, pp. 97-112, (1991).
Handle: RePEc:nbr:nberwo:3402

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  1. Grossman, Sanford J. & Shiller, Robert J., 1982. "Consumption correlatedness and risk measurement in economies with non-traded assets and heterogeneous information," Journal of Financial Economics, Elsevier, Elsevier, vol. 10(2), pages 195-210, July.
  2. Mankiw, N. Gregory, 1986. "The equity premium and the concentration of aggregate shocks," Journal of Financial Economics, Elsevier, Elsevier, vol. 17(1), pages 211-219, September.
  3. Kandel, S. & Stambaugh, R.F., 1990. "Asset Returns, Investment Horizons, And Intertemporal Preferences," Weiss Center Working Papers, Wharton School - Weiss Center for International Financial Research 7-90, Wharton School - Weiss Center for International Financial Research.
  4. Constantinides, George M, 1990. "Habit Formation: A Resolution of the Equity Premium Puzzle," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(3), pages 519-43, June.
  5. Robert J. Shiller & John Y. Campbell, 1986. "The Dividend-Price Ratio and Expectations of Future Dividends and Discount Factors," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 812, Cowles Foundation for Research in Economics, Yale University.
  6. Mehra, Rajnish & Prescott, Edward C., 1985. "The equity premium: A puzzle," Journal of Monetary Economics, Elsevier, Elsevier, vol. 15(2), pages 145-161, March.
  7. Andrew B. Abel, . "Asset Prices Under Habit Formation and Catching Up With the Jones," Rodney L. White Center for Financial Research Working Papers, Wharton School Rodney L. White Center for Financial Research 1-90, Wharton School Rodney L. White Center for Financial Research.
  8. Andrew B. Abel, . "Asset Prices Under Heterogenous Beliefs: Implications for the Equity Premium," Rodney L. White Center for Financial Research Working Papers, Wharton School Rodney L. White Center for Financial Research 09-89, Wharton School Rodney L. White Center for Financial Research.
  9. Shmuel Kandel & Robert F. Stambaugh, . "Asset Returns, Investment Horizons, and Intertemporal Preferences (Reprint 009)," Rodney L. White Center for Financial Research Working Papers, Wharton School Rodney L. White Center for Financial Research 07-90, Wharton School Rodney L. White Center for Financial Research.
  10. Mehra, Rajnish & Prescott, Edward C., 1988. "The equity risk premium: A solution?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 22(1), pages 133-136, July.
  11. Stephen P. Zeldes, . "Consumption and Liquidity Constraints: An Empirical Investigation," Rodney L. White Center for Financial Research Working Papers, Wharton School Rodney L. White Center for Financial Research 16-88, Wharton School Rodney L. White Center for Financial Research.
  12. Rietz, Thomas A., 1988. "The equity risk premium a solution," Journal of Monetary Economics, Elsevier, Elsevier, vol. 22(1), pages 117-131, July.
  13. Matthew D. Shapiro & N. Gregory Mankiw, 1985. "Risk and Return: Consumption Beta Versus Market Beta," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 738, Cowles Foundation for Research in Economics, Yale University.
  14. Stephen G. Cecchetti & Pok-sang Lam & Nelson C. Clark, 1991. "The Equity Premium and the Risk Free Rate: Matching the Moments," NBER Working Papers 3752, National Bureau of Economic Research, Inc.
  15. Kahn, James A., 1990. "Moral hazard, imperfect risk-sharing, and the behavior of asset returns," Journal of Monetary Economics, Elsevier, Elsevier, vol. 26(1), pages 27-44, August.
  16. Merton, Robert C, 1973. "An Intertemporal Capital Asset Pricing Model," Econometrica, Econometric Society, Econometric Society, vol. 41(5), pages 867-87, September.
  17. Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, Econometric Society, vol. 46(6), pages 1429-45, November.
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