Consumption , Aggregate Wealth , and Expected Stock Returns

@inproceedings{Deaton2008ConsumptionA,
  title={Consumption , Aggregate Wealth , and Expected Stock Returns},
  author={Angus S Deaton},
  year={2008}
}
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. We also find that this variable is a better forecaster of future returns at short and intermediate horizons than is the dividend yield, the dividend payout ratio, and several other… CONTINUE READING
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