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Consumption, wealth and expected stock returns in Australia: some further results


  • Lance Fisher


This article re-examines the evidence that cay, the residual from a cointegrating regression of consumption on labour income and household wealth, is a useful predictor of excess stock returns in Australian data. In recursive samples beginning in 1976:q4 and ending from 1990:q1 to 2003:q1, cay is a strong predictor of excess returns. In samples that end thereafter, cay loses its predictive power for returns. This is due to a break-down in the cointegrating relation among consumption, labour income and household wealth following recent developments in the housing and stock markets.

Suggested Citation

  • Lance Fisher, 2008. "Consumption, wealth and expected stock returns in Australia: some further results," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 4(1), pages 13-18.
  • Handle: RePEc:taf:apfelt:v:4:y:2008:i:1:p:13-18
    DOI: 10.1080/17446540701262843

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