IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/17984.html

Asset Market Participation, Redistribution, and Asset Pricing

Author

Listed:
  • Gaudio, Francesco Saverio
  • Petrella, Ivan
  • Santoro, Emiliano

Abstract

We study how redistribution between assetholders and non-assetholders links macroeconomic fluctuations to expected stock returns. Using U.S. household data, we show that aggregate and relative consumption growth forecast excess returns with opposite signs and at different horizons. We interpret these patterns through a production-based asset-pricing model with limited asset market participation and external habits. In the model, aggregate consumption captures variation in the price of risk, while relative consumption reflects changes in the quantity of risk borne by investors. Technology shocks drive most macroeconomic fluctuations, whereas redistributive shocks generate large short-run movements in inequality and represent the main source of risk priced in financial markets. This points to a macro–finance disconnect between the drivers of business cycles and those governing risk premia.

Suggested Citation

  • Gaudio, Francesco Saverio & Petrella, Ivan & Santoro, Emiliano, 2023. "Asset Market Participation, Redistribution, and Asset Pricing," CEPR Discussion Papers 17984, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:17984
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP17984
    Download Restriction: no
    ---><---

    Other versions of this item:

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:17984. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CEPR (email available below). General contact details of provider: https://cepr.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.