Consumption asymmetry and the stock market: New evidence through a threshold adjustment model

No 2005-08, Working papers from University of Connecticut, Department of Economics

Abstract: This paper investigates whether stock market wealth affects real consumption asymmetrically through a threshold adjustment model. The empirical findings for the US show that wealth produces an asymmetric effect on real consumption, with negative 'news' affecting consumption less than positive 'news.' Thus, policy makers may want to focus more attention on preventing asset 'bubbles' than on responding to negative asset shocks.

Keywords: Consumption; Stock market; Wealth effect; Asymmetry (search for similar items in EconPapers)
JEL-codes: E21 E44 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2005-03
New Economics Papers: this item is included in nep-fin, nep-fmk and nep-mac
Note: The authors express special thanks to Angelos Antzoulatos and Plutarchos Sakellaris for their comments on an earlier draft of this paper and to Giannis Litsios, a charismatic doctorate candidate, for his valuable assistance with the software used in this work. Needless to say, the usual disclaimer applies.
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:uct:uconnp:2005-08

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