| Abstract: |
Lower mutual fund loads have plausibly boosted the stock wealth elasticity of
U.S. consumption by enhancing stock liquidity and arguably by inducing stock
ownership among middle-income families, consistent with theory and
cross-section data (Guiso, Haliassios, and Jappelli (2003), Haliassios (2002),
Heaton and Lucas (1996, 2000), and Vissing-Jorgensen (2002)). In load-modified
models, the stock wealth elasticity is declining in loads and more stable
long-run wealth and income coefficients arise, especially controlling for
mortgage refinancing and equity withdrawal activity. Modified models imply
that the stock wealth elasticity has risen, while conventional models
overestimate the wealth and underestimate the income elasticities of
consumption. |