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Asset Market Participation, Redistribution, and Asset Pricing

Author

Listed:
  • Gaudio Francesco Saverio

    (Sapienza University of Rome)

  • Petrella Ivan

    (Collegio Carlo Alberto, University of Turin and CEPR)

  • Santoro Emiliano

    (Catholic University of Milan)

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, 2026. "Asset Market Participation, Redistribution, and Asset Pricing," Working papers 108, Department of Economics, Social Studies, Applied Mathematics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
    • Handle: RePEc:tur:wpapnw:108
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    Keywords

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    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

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