This paper studies the role of detrended wealth in predicting stock returns. We call a transitory movement in wealth one that produces a deviation from its shared trend with consumption and labor income. Using U.S. quarterly stock market data, we find that these trend deviations in wealth are...

In a recent paper ("A Primer on the Economics and Time Series Econometrics of Wealth Effects," 2001), Davis and Palumbo investigate the empirical relation between three cointegrated variables: aggregate consumption, asset wealth, and labor income. Although cointegration implies that an...

Paper for a conference sponsored by the Federal Reserve Bank of New York entitled Financial Innovation and Monetary Transmission

This article is the first formal investigation of consumer attitudes that compares the forecasting power of the University of Michigan's Index of Consumer Sentiment and the Conference Board's Consumer Confidence Index. The authors find that measures available from the Conference Board have both...

Many argue that the astonishing growth in Americans' stock portfolios in the 1990s has been a major force behind the growth of consumer spending. This article reviews the relationship between stock market movements and consumption. Using various econometric techniques and specifications, the...

This paper reestimates the simple forecasting regressions in Carroll, Fuhrer, and Wilcox (1993) (CFW), which investigate the predictive power of consumer sentiment for consumption growth. Durability in the consumption categories analyzed implies that the error term may be distributed as an...

This paper investigates the role of consumer credit in determining real consumption growth in aggregate, post-war U.S. data. This paper presents evidence that predictable growth in consumer credit is significantly related to consumption growth. The finding is inconsistent with the predictions of...

This paper investigates the forecasting power of consumer sentiment for household expenditure. We compare the predictive power of two measures of consumer attitudes, and then further compare each survey's expectations component with one another, and with the broader sentiment measures. The...

This paper concerns pitfalls associated with the use of approximations to dynamic Euler equations. Two applications of the approximations are notable. First, tests for precautionary saving motives typically involve regressing consumption growth on uncertainty in expected consumption growth. The...

The 1990s have seen astonishing growth in the stock market portfolios of Americans, which many have argued has been a major force behind the growth of consumer spending. This paper reviews the relationship between the stock market and the consumer. Using a variety of econometric techniques and...