Stock Market Returns and Consumption

Research output: Working paper


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 13 percent for the bottom 50% of the wealth distribution, but a flat 5 percent for the rest of the 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
  • National Bureau of Economic Research (NBER)
  • University of California, Berkeley
  • Research Institute of Industrial Economics
  • Institute of Labor Economics
Research areas and keywords

Subject classification (UKÄ) – MANDATORY

  • Economics


  • Capital gain, Dividend income, Consumption, Near-rational behavior, D14, E21, G12
Original languageEnglish
PublisherDepartment of Economics, Lund University
Number of pages57
Publication statusPublished - 2018
Publication categoryResearch

Publication series

NameWorking Papers
PublisherDepartment of Economics, Lund University