The Consumption Response to Realized Capital Gains: Evidence from Mutual Fund Liquidations

Steffen Meyer, Michaela Pagel, Alessandro Previtero

Publikation: Konferencebidrag uden forlag/tidsskriftPaperForskningpeer review

Resumé

Using a large sample of transaction-level data on all asset holdings, spending, and income from a German retail bank, this paper explores how individual consumption responds to realized capital gains. Our identification strategy exploits mutual fund closures, which are arguably exogenous to individual characteristics. We estimate the marginal propensity to consume (MPC) out of one dollar received from a forced sale event and find that it is approximately 30%. We explore how the MPC varies in age and income as well as over the business cycle and across interest rate regimes. We find a higher MPC for low-income investors, which appears consistent with standard life-cycle portfolio-choice models, though we do not find any differences in the MPC for young versus old investors. We also find that the MPC to be lower in recessions and decreasing in interest rates, which is surprising from a standard model perspective.
OriginalsprogEngelsk
Publikationsdato2018
StatusUdgivet - 2018
Begivenhed3rd Annual CEPR Symposium on Household Finance - Italy, Sicily
Varighed: 5. okt. 20186. okt. 2018
https://cepr.org/sites/default/files/Draft%20programme_HF%20Sicily%202018_v3_15.pdf

Konference

Konference3rd Annual CEPR Symposium on Household Finance
LokationItaly
BySicily
Periode05/10/201806/10/2018
Internetadresse

Fingeraftryk

Mutual funds
Capital gains
Marginal propensity to consume
Liquidation
Interest rates
Investors
Income
Portfolio choice
Recession
Closure
Choice models
Business cycles
Individual characteristics
Low income
Assets
Retail
Life cycle

Citer dette

Meyer, S., Pagel, M., & Previtero, A. (2018). The Consumption Response to Realized Capital Gains: Evidence from Mutual Fund Liquidations. Afhandling præsenteret på 3rd Annual CEPR Symposium on Household Finance, Sicily, .
Meyer, Steffen ; Pagel, Michaela ; Previtero, Alessandro. / The Consumption Response to Realized Capital Gains: Evidence from Mutual Fund Liquidations. Afhandling præsenteret på 3rd Annual CEPR Symposium on Household Finance, Sicily, .
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abstract = "Using a large sample of transaction-level data on all asset holdings, spending, and income from a German retail bank, this paper explores how individual consumption responds to realized capital gains. Our identification strategy exploits mutual fund closures, which are arguably exogenous to individual characteristics. We estimate the marginal propensity to consume (MPC) out of one dollar received from a forced sale event and find that it is approximately 30{\%}. We explore how the MPC varies in age and income as well as over the business cycle and across interest rate regimes. We find a higher MPC for low-income investors, which appears consistent with standard life-cycle portfolio-choice models, though we do not find any differences in the MPC for young versus old investors. We also find that the MPC to be lower in recessions and decreasing in interest rates, which is surprising from a standard model perspective.",
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Meyer, S, Pagel, M & Previtero, A 2018, 'The Consumption Response to Realized Capital Gains: Evidence from Mutual Fund Liquidations' Paper fremlagt ved 3rd Annual CEPR Symposium on Household Finance, Sicily, 05/10/2018 - 06/10/2018, .

The Consumption Response to Realized Capital Gains: Evidence from Mutual Fund Liquidations. / Meyer, Steffen; Pagel, Michaela; Previtero, Alessandro.

2018. Afhandling præsenteret på 3rd Annual CEPR Symposium on Household Finance, Sicily, .

Publikation: Konferencebidrag uden forlag/tidsskriftPaperForskningpeer review

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AU - Pagel, Michaela

AU - Previtero, Alessandro

PY - 2018

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N2 - Using a large sample of transaction-level data on all asset holdings, spending, and income from a German retail bank, this paper explores how individual consumption responds to realized capital gains. Our identification strategy exploits mutual fund closures, which are arguably exogenous to individual characteristics. We estimate the marginal propensity to consume (MPC) out of one dollar received from a forced sale event and find that it is approximately 30%. We explore how the MPC varies in age and income as well as over the business cycle and across interest rate regimes. We find a higher MPC for low-income investors, which appears consistent with standard life-cycle portfolio-choice models, though we do not find any differences in the MPC for young versus old investors. We also find that the MPC to be lower in recessions and decreasing in interest rates, which is surprising from a standard model perspective.

AB - Using a large sample of transaction-level data on all asset holdings, spending, and income from a German retail bank, this paper explores how individual consumption responds to realized capital gains. Our identification strategy exploits mutual fund closures, which are arguably exogenous to individual characteristics. We estimate the marginal propensity to consume (MPC) out of one dollar received from a forced sale event and find that it is approximately 30%. We explore how the MPC varies in age and income as well as over the business cycle and across interest rate regimes. We find a higher MPC for low-income investors, which appears consistent with standard life-cycle portfolio-choice models, though we do not find any differences in the MPC for young versus old investors. We also find that the MPC to be lower in recessions and decreasing in interest rates, which is surprising from a standard model perspective.

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Meyer S, Pagel M, Previtero A. The Consumption Response to Realized Capital Gains: Evidence from Mutual Fund Liquidations. 2018. Afhandling præsenteret på 3rd Annual CEPR Symposium on Household Finance, Sicily, .