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Consumption Asymmetry and the Stock Market: Further Evidence

  • Nicholas Apergis

    (University of Macedonia)

  • Stephen M. Miller

    (University of Nevada, Las Vegas, and University of Connecticut)

This paper investigates the presence of asymmetric effects of stock returns on real consumption in the US. After identifying the asymmetric behavior for consumption as well as the wealth effect, the results confirm that stock returns have an asymmetric effect on real consumption, with negative 'news' affecting consumption more than positive 'news'.

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File URL: http://web2.uconn.edu/economics/working/2004-19.pdf
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Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2004-19.

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Length: 13 pages
Date of creation: Apr 2004
Date of revision:
Handle: RePEc:uct:uconnp:2004-19
Note: The authors express special thanks to Angelos Antzoulatos, Georgios Karras, and Plutarchos Sakellaris for their comments on an earlier draft. Nonetheless, the usual disclaimer applies.
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Web page: http://www.econ.uconn.edu/

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  1. Randall Morck & Andrei Shleifer & Robert W. Vishny, 1990. "The Stock Market and Investment: Is the Market a Sideshow?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(2), pages 157-216.
  2. Daniel Kahneman & Jack L. Knetsch & Richard H. Thaler, 1991. "Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 193-206, Winter.
  3. Ricardo J. Caballero, 1992. "Near-Rationality, Heterogeneity and Aggregate Consumption," NBER Working Papers 4035, National Bureau of Economic Research, Inc.
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  6. Sydney Ludvigson & Charles Steindel, 1998. "How important is the stock market effect on consumption?," Research Paper 9821, Federal Reserve Bank of New York.
  7. Karen E. Dynan & Dean M. Maki, 2001. "Does stock market wealth matter for consumption?," Finance and Economics Discussion Series 2001-23, Board of Governors of the Federal Reserve System (U.S.).
  8. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
  9. Jonathan A. Parker, 2000. "Spendthrift in America? On Two Decades of Decline in the U.S. Saving Rate," NBER Chapters, in: NBER Macroeconomics Annual 1999, Volume 14, pages 317-387 National Bureau of Economic Research, Inc.
  10. Horioka, C.Y., 1995. "Capital Gains in Japan: Their Magnitude and Imact on Consumption," ISER Discussion Paper 0388, Institute of Social and Economic Research, Osaka University.
  11. John Y. Campbell, 2000. "Asset Pricing at the Millennium," Journal of Finance, American Finance Association, vol. 55(4), pages 1515-1567, 08.
  12. Morris A. Davis & Michael G. Palumbo, 2001. "A primer on the economics and time series econometrics of wealth effects," Finance and Economics Discussion Series 2001-09, Board of Governors of the Federal Reserve System (U.S.).
  13. Martha Starr-McCluer, 2002. "Stock Market Wealth and Consumer Spending," Economic Inquiry, Western Economic Association International, vol. 40(1), pages 69-79, January.
  14. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  15. Sichel, D.E., 1988. "Business Cycle Asymmetry: A Deeper Look," Papers 85, Princeton, Department of Economics - Financial Research Center.
  16. Karras, Georgios, 1996. "Why are the effects of money-supply shocks asymmetric? Convex aggregate supply or "pushing on a string"?," Journal of Macroeconomics, Elsevier, vol. 18(4), pages 605-619.
  17. Yash P. Mehra, 2001. "The wealth effect in empirical life-cycle aggregate consumption equations," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 45-67.
  18. Edison, Hali & Slok, Torsten, 2002. "Stock Market Wealth Effects and the New Economy: A Cross-Country Study," International Finance, Wiley Blackwell, vol. 5(1), pages 1-22, Spring.
  19. Speight, A E H & McMillan, D G, 1998. "Testing for Asymmetries in UK Macroeconomic Time Series," Scottish Journal of Political Economy, Scottish Economic Society, vol. 45(2), pages 158-70, May.
  20. Steven Cook, 2000. "Cointegration and disaggregation: evidence from UK consumers' expenditure," Applied Economics Letters, Taylor & Francis Journals, vol. 7(4), pages 259-262.
  21. Vogelsang, T.I. & Perron, P., 1991. "Nonstationary and Level Shifts With An Application To Purchasing Power Parity," Papers 359, Princeton, Department of Economics - Econometric Research Program.
  22. Poterba, J.M. & Samwick, A.A., 1996. "Stock Ownership Patterns, Stock Market Fluctuations, and Consumption," Working papers 96-2, Massachusetts Institute of Technology (MIT), Department of Economics.
  23. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
  24. Laurence Boone & Claude Giorno & Pete Richardson, 1998. "Stock Market Fluctuations and Consumption Behaviour: Some Recent Evidence," OECD Economics Department Working Papers 208, OECD Publishing.
  25. James M. Poterba, 2000. "Stock Market Wealth and Consumption," Journal of Economic Perspectives, American Economic Association, vol. 14(2), pages 99-118, Spring.
  26. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-87, December.
  27. Alan Carruth & Andrew Dickerson, 2003. "An asymmetric error correction model of UK consumer spending," Applied Economics, Taylor & Francis Journals, vol. 35(6), pages 619-630.
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