Stock Market Returns and Consumption

Research output: Contribution to journalArticle


This paper employs Swedish data on households' stock holdings to investigate how consumption responds to changes in stock market returns. We instrument the actual capital gains and dividend payments with past portfolio weights. Unrealized capital gains lead to a marginal propensity to consume (MPC) of 23 percent for the bottom 50% of the wealth distribution and about 3 percent for the top 30% of the wealth distribution. Households’ consumption is significantly more responsive to dividend payouts across all parts of the wealth distribution. Our findings are consistent with households treating capital gains and dividends as separate sources of income.


External organisations
  • Harvard Business School
  • University of California, Berkeley
  • National Bureau of Economic Research (NBER)
Research areas and keywords

Subject classification (UKÄ) – MANDATORY

  • Economics
Original languageEnglish
JournalJournal of Finance
Publication statusAccepted/In press - 2020
Publication categoryResearch