NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Consumption of Stockholders and Non-Stockholders

N. Gregory Mankiw, Stephen P. Zeldes

NBER Working Paper No. 3402 (Also Reprint No. r1660)*
Issued in November 1991
NBER Program(s):   EFG    ME    ITI    PE

Only one-fourth of U.S. families own stock. This paper examines whether

the consumption of stockholders differs from the consumption of non-stockholders

and whether these differences help explain the empirical failures

of the consumption-based CAPM. Household panel data are used to construct time

series on the consumption of each group. The results indicate that the

consumption of stockholders is more volatile than that of non-stockholders and

is more highly correlated with the excess return on the stock market. These

differences help explain the size of the equity premium, although they do not

fully resolve the equity premium puzzle.

*Published: Journal of Financial Economics, Vol. 27, pp. 97-112, (1991).

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