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Tuesday, July 14, 2020 | History

4 edition of Consumption, aggregate wealth and expected stock returns found in the catalog.

Consumption, aggregate wealth and expected stock returns

Martin Lettau

Consumption, aggregate wealth and expected stock returns

by Martin Lettau

  • 100 Want to read
  • 37 Currently reading

Published by Federal Reserve Bank of New York in [New York, N.Y.] .
Written in English

    Subjects:
  • Stocks -- Prices -- Econometric models.,
  • Consumption (Economics) -- Mathematical models.

  • Edition Notes

    StatementMartin Lettau and Sydney Ludvigson.
    SeriesStaff reports ;, no. 77, Staff reports (Federal Reserve Bank of New York : Online) ;, no. 77.
    ContributionsLudvigson, Sydney C., 1964-, Federal Reserve Bank of New York.
    Classifications
    LC ClassificationsHB1
    The Physical Object
    FormatElectronic resource
    ID Numbers
    Open LibraryOL3476934M
    LC Control Number2005616507

    T1 - Consumption, aggregate wealth, and expected stock returns. AU - Lettau, Martin. AU - Ludvigson, Sydney. PY - /6. Y1 - /6. N2 - This paper studies the role of fluctuations in the aggregate consumption-wealth ratio for predicting stock returns. Consumption, aggregate wealth and expected stock returns. By Sydney Ludvigson and Martin Lettau. We show that a wide class of optimal models of consumer behavior imply that the log consumption-aggregate (human and nonhuman) wealth ratio forecasts the expected return on aggregate wealth, or the market portfolio.

    Sydney C. Ludvigson is an economist and the Julius Silver, Roslyn S. Silver, and Enid Silver Winslow Professor of Economics at New York University.. She is a research associate at the National Bureau of Economic Research and a Co-Director of the Asset Pricing Program. From to , she was an Associate Editor of the American Economic Review. Consumption, Aggregate Wealth, and Expected Stock Returns (Digest Summary) View the full article (PDF) Abstract. This model predicts that the ratio of consumption to aggregate wealth summarizes the investor's expectation about future share returns. Lettau and Ludvigson then test this hypothesis by considering the return on share indexes in.

    hpslulfdohylghqfhwkdwuhdopdfurhfrqrplfyduldeohvshuirupvxfkdixqfwlrq1 Wklvsdshudgrswvdqhzdssurdfkwrlqyhvwljdwlqjwkholqndjhvehwzhhqpdfurhfrqrplfv. The classical consumption-wealth channel postulates that the current and future rises when durable consumption falls relative to non-durable consumption. The expected returns on stocks are higher at business cycle troughs than at peaks. This may be partly countercyclical nature of stock returns. Aggregate consumption shocks seem to.


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Consumption, aggregate wealth and expected stock returns by Martin Lettau Download PDF EPUB FB2

Consumption, Aggregate Wealth, and Expected Stock Returns erences, the log consumption-aggregate wealth ratio predicts asset returns because it is a function of expected future returns on the market portfolio.

This result has been noted previously by Campbell and Mankiw () and is the starting point of our theoretical framework. This paper studies the role of fluctuations in the aggregate consumption–wealth ratio for predicting stock returns.

Using U.S. quarterly stock market data, we find that these fluctuations in the consumption–wealth ratio are strong predictors of both real stock returns and excess returns over a Treasury bill by: Downloadable.

This paper studies the role of fluctuations in the aggregate consumption–wealth ratio for predicting aggregate wealth and expected stock returns book returns. Using U.S. quarterly stock market data, we find that these fluctuations in the consumption–wealth ratio are strong predictors of both real stock returns and excess returns over a Treasury bill rate.

We also find that this variable is a better forecaster of. Request PDF | Consumption, Aggregate Wealth, and Expected Stock Returns | This paper studies the role of fluctuations in the aggregate consumption-wealth ratio for predicting stock returns.

Using. Following the methodology suggested by (Lettau, M., Ludvigson, S., Consumption, aggregate wealth and expected stock returns, Journal of Finance 2, –). CiteSeerX - Document Details (Isaac Councill, Lee Giles, Pradeep Teregowda): This paper studies the role of fluctuations in the aggregate consumption–wealth ratio for predicting stock returns.

Using U.S. quarterly stock market data, we find that these fluctuations in the consumption–wealth ratio are strong predictors of both real stock returns and excess returns over a Treasury bill rate.

Why should wealth, detrended in this way, forecast asset returns. We show that a wide class of optimal models of consumer behavior imply that the log consumption-aggregate (human and nonhuman) wealth ratio forecasts the expected return on aggregate wealth, or the market by: Downloadable (with restrictions).

Author(s): Lettau, Martin & Ludvigson, Sydney. Abstract: This paper studies the role of detrended wealth in predicting stock returns. We call a transitory movement in wealth one that produces a deviation from its shared trend with consumption and labor income. Using quarterly stock market data we find that these trend deviations in wealth are strong.

Consumption, Aggregate Wealth, and Expected Stock Returns The rest of the paper is organized as follows. The next section presents the theoretical framework linking consumption, aggregate wealth, and expected returns, and shows how we.

Consumption, Aggregate Wealth, and Expected Stock Returns in Japan Chikashi TSUJI Graduate School of Systems and Information Engineering, University of Tsukuba Tennodai, Tsukuba, IbarakiJapan Tel: E-mail: [email protected] CiteSeerX - Document Details (Isaac Councill, Lee Giles, Pradeep Teregowda): and Mark Taylor for helpful information for the empirical analysis in this article.

This paper studies the role of fluctuations in the aggregate consumption–wealth ratio for predicting stock returns in Japan. Using quarterly Japanese stock market data, we find three main results that are different from US evidence. Consumption, Aggregate Wealth, and Expected Stock Returns Martin Lettau and Sydney Ludvigson Journal of Finance vol.

56, no. 3 (June )– The authors study how the relationship between current wealth and current consumption can be used to predict future aggre-gate share returns. They find that aggregate consumption. Following the methodology suggested by (Lettau, M., Ludvigson, S., Consumption, aggregate wealth and expected stock returns, Journal of Finance.

Consumption, aggregate wealth and expected stock returns: a fractional cointegration approach. Quantitative Finance: Vol. 18, No. 12, pp. To settle the link between consumption-wealth ratio and expected stock returns, con-sider a representative consumer who invests his total wealth, receiving a time-varying return.

Let W t and C t be the aggregate wealth and aggregate consumption in period t, respectively. R w;t+1 is the net return on aggregate invested wealth. The intertemporal. In contrast to the aggregate-level findings, earnings yield has significant explanatory power for the time-series and cross-sectional variation in firmlevel stock returns and the 48 industry portfolio returns.

The mean reversion of stock prices as well as the earnings' correlation with expected stock returns are responsible for the forecasting. Consumption, aggregate wealth and expected stock returns. London: Centre for Economic Policy Research, [] (OCoLC) Material Type: Internet resource: Document Type: Book, Internet Resource: All Authors / Contributors: Martin Lettau; Sydney Ludvigson.

In contrast, isolating expected stock return information from other variables may be diffi cult (in addition to stock returns, the dividend yield may predict dividend growth, while the consumption-wealth ratio may predict non-stock wealth returns).

Empirically, a detrended version of this ratio strongly predicts U.S. and international stock. Consumption, aggregate wealth and expected stock returns. Martin Lettau and Sydney Ludvigson (). No 77, Staff Reports from Federal Reserve Bank of New York Abstract: This paper studies the role of detrended wealth in predicting stock returns.

We call a transitory movement in wealth one that produces a deviation from its shared trend with consumption and labor income. Search this site: Humanities. Architecture and Environmental Design; Art History. Abstract. We study the interactions between the stock market and the labor market.

When aggregate risk premiums are time-varying, predictive variables for market excess returns should forecast long-horizon growth in the marginal benefit of hiring and thereby long-horizon aggregate employment growth.

In this work, I show, from the consumer's budget constraint, that the residuals of the trend relationship among consumption, financial wealth, housing wealth and labor income (summarized by the variable cday) should predict better U.S.

and U.K. quarterly stock market returns than a variable like cay from Lettau and Ludvigson (), which considers aggregate wealth instead.expected returns on aggregate wealth and consumption growth and thus consumption behavior reveals the agent’s expectations about future returns and consumption growth.

Lettau and Ludvigson, Consumption, Aggregate Wealth, and Expected Stock Returns.