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Consuming dividends

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Listed:
  • Bräuer, Konstantin
  • Hackethal, Andreas
  • Hanspal, Tobin

Abstract

This paper studies why investors buy dividend-paying assets and how they time their consumption accordingly. We combine administrative bank data linking customers' consumption transactions and income to detailed portfolio data and survey responses on financial behavior. We find that private consumption is excessively sensitive to dividend income. Investors across wealth, income, and age distributions increase spending precisely around days of dividend receipt. Importantly, the consumption response is driven by financially prudent investors who select dividend portfolios, anticipate dividend income, and plan consumption accordingly. Our results contribute to the literature on a dividend clientele and provide evidence of 'planned' excess sensitivity.

Suggested Citation

  • Bräuer, Konstantin & Hackethal, Andreas & Hanspal, Tobin, 2020. "Consuming dividends," SAFE Working Paper Series 280, Leibniz Institute for Financial Research SAFE.
    • Handle: RePEc:zbw:safewp:280
    DOI: 10.2139/ssrn.3466731
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    More about this item

    Keywords

    Consumption; Stock market wealth; Dividends; Excess sensitivity; Self-control; Household finance; Retail investors;
    All these keywords.

    JEL classification:

    • G50 - Financial Economics - - Household Finance - - - General
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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