Consumption, wealth and expected stock returns in Australia

Lance A. Fisher*, Graham M. Voss

*Corresponding author for this work

Research output: Contribution to journalArticle

19 Citations (Scopus)

Abstract

The present paper investigates the relationship between consumption, labour income and household wealth in Australia within the intertemporal consumption framework developed by Lettau and Ludvigson (2001). We first test for a long-run relationship among these series and then investigate whether private dissaving, measured as the deviation from the estimated relationship, has information content for future stock returns. We find that private dissaving has predictive power for quarterly returns on the ASX200 and for returns over long holding periods. The recent substantial decline in private dissaving suggests that consumers view the recent surge in non-financial wealth as transitory and expect a correction.

Original languageEnglish
Pages (from-to)359-372
Number of pages14
JournalEconomic Record
Volume80
Issue number251
DOIs
Publication statusPublished - Dec 2004
Externally publishedYes

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