Consumption asymmetry and the stock market: New evidence through a threshold adjustment model
This paper investigates whether stock market wealth affects real consumption asymmetrically through a threshold adjustment model. The empirical findings for the US show that wealth produces an asymmetric effect on real consumption, with negative 'news' affecting consumption less than positive 'news.' Thus, policy makers may want to focus more attention on preventing asset 'bubbles' than on responding to negative asset shocks.
|Date of creation:||Mar 2005|
|Date of revision:|
|Note:||The authors express special thanks to Angelos Antzoulatos and Plutarchos Sakellaris for their comments on an earlier draft of this paper and to Giannis Litsios, a charismatic doctorate candidate, for his valuable assistance with the software used in this work. Needless to say, the usual disclaimer applies.|
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