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Consuming Dividends

Author

Listed:
  • Konstantin Bräuer
  • Andreas Hackethal
  • Tobin Hanspal

Abstract

This paper studies why investors buy dividend-paying assets and how they time consumption accordingly. We combine administrative bank data linking customers’ consumption and income to portfolio data and survey responses on financial behavior. We find that private consumption is excessively sensitive to dividend income. Investors across wealth, income, and age distributions increase spending precisely around days of dividend receipt. Our results are at odds with a number of existing rational and behavioral explanations, such as financial constraints and impulsiveness. Instead, consumption responses reflect “planned” excess sensitivity, driven by investors who select dividend portfolios, anticipate dividend income, and plan consumption accordingly.

Suggested Citation

  • Konstantin Bräuer & Andreas Hackethal & Tobin Hanspal, 2022. "Consuming Dividends," The Review of Financial Studies, Society for Financial Studies, vol. 35(10), pages 4802-4857.
    • Handle: RePEc:oup:rfinst:v:35:y:2022:i:10:p:4802-4857.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhac010
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    Cited by:

    1. Korevaar, Matthijs, 2023. "Reaching for yield and the housing market: Evidence from 18th-century Amsterdam," Journal of Financial Economics, Elsevier, vol. 148(3), pages 273-296.

    More about this item

    JEL classification:

    • G50 - Financial Economics - - Household Finance - - - General
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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