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Please use this identifier to cite or link to this item: http://hdl.handle.net/10400.5/3291

Title: Consumption, wealth, stock and government bond returns : international evidence
Authors: Afonso, António
Sousa, Ricardo M.
Keywords: Consumption
Wealth
Stock returns
Bond returns
Issue Date: 2011
Publisher: ISEG - Departamento de Economia
Citation: Afonso, António, Ricardo M. Sousa. 2011. "Consumption, wealth, stock and government bond returns : international evidence". Instituto Superior de Economia e Gestão. DE Working papers; nº 9-2011/DE/UECE
Series/Report no.: DE Working papers; nº9-2011/DE/UECE
Abstract: In this paper, we show, from the consumer’s budget constraint, that the residuals of the trend relationship among consumption, aggregate wealth, and labour income should predict both stock returns and government bond yields. We use data for several OECD countries and find that when agents expect future stock returns to be higher, they will temporarily allow consumption to rise. Regarding government bond yields, when bonds are seen as a component of asset wealth, then investors react in the same way. If, however, the increase in the yields is perceived as signalling a future rise in taxes, then they will temporarily reduce their consumption.
URI: http://hdl.handle.net/10400.5/3291
ISSN: 0874-4548
Appears in Collections:UECE - Documentos de Trabalho / UECE - Working Papers
DE - Documentos de trabalho / Working Papers

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