|Appears in Collections:||Accounting and Finance Journal Articles|
|Peer Review Status:||Refereed|
|Title:||Consumption and stock prices: Evidence from a small international panel|
|Citation:||McMillan D (2013) Consumption and stock prices: Evidence from a small international panel, Journal of Macroeconomics, 36, pp. 76-88.|
|Abstract:||This paper examines the relationship between consumption growth and the stock market for the G7 markets primarily using panel estimation techniques. We consider whether consumption growth is affected by stock returns and the dividend yield. The use of returns determines the existence of a wealth effect, while the use of the dividend yield can determine whether consumption is affected by short-term deviations of prices from fundamental value (bubbles) as well as expectations of future economic behaviour. Panel unit root tests confirm the stationarity of each variable, although high persistence is noted in the dividend yield. Regression results support a significant relationship between the dividend yield and consumption growth, such that a fall in the yield (high prices relative to dividends) is associated with higher future consumption. This result is robust across different empirical specifications to control for high persistence and possible cross-sectional dependence. Results for returns differ across the specifications but are typically supportive of a positive relationship. Overall, we argue our results support the view that when stock prices deviate from their fundamental path this has an effect on future consumption. This may have important implication with regard to how policy-makers deal with stock market bubbles, both positive and negative.|
|Rights:||The publisher does not allow this work to be made publicly available in this Repository. Please use the Request a Copy feature at the foot of the Repository record to request a copy directly from the author. You can only request a copy if you wish to use this work for your own research or private study.|
|1-s2.0-S0164070413000505-main.pdf||236.39 kB||Adobe PDF||Under Permanent Embargo Request a copy|
Note: If any of the files in this item are currently embargoed, you can request a copy directly from the author by clicking the padlock icon above. However, this facility is dependent on the depositor still being contactable at their original email address.
This item is protected by original copyright
Items in the Repository are protected by copyright, with all rights reserved, unless otherwise indicated.
If you believe that any material held in STORRE infringes copyright, please contact email@example.com providing details and we will remove the Work from public display in STORRE and investigate your claim.