NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Plamen T. Nenov

Norwegian Business School (BI)
Nydalsveien 37 0484 Oslo, Norway

E-Mail: plamen.nenov@bi.no
Institutional Affiliation: Norwegian Business School (BI)

NBER Working Papers and Publications

June 2019Stock Market Wealth and the Real Economy: A Local Labor Market Approach
with Gabriel Chodorow-Reich, Alp Simsek: w25959
We provide evidence on the stock market consumption wealth effect by using a local labor market analysis and regional heterogeneity in stock market wealth. An increase in local stock wealth driven by aggregate stock prices increases local employment and payroll in nontradable industries and in total, while having no effect on employment in tradable industries. In a model with consumption wealth effects and geographic heterogeneity, these responses imply a marginal propensity to consume out of a dollar of stock wealth of 2.8 cents per year. We also use the model to quantify the aggregate effects of a stock market wealth shock when monetary policy is passive. A 20% increase in stock valuations, unless countered by monetary policy, increases the aggregate labor bill by at least 0.85% and aggr...
October 2015The Choice Channel of Financial Innovation
with Felipe S. Iachan, Alp Simsek: w21686
Financial innovations in recent decades have vastly expanded investors' portfolio choice. We theoretically analyze the effect of these developments on investors' savings and asset returns. In our model, investors with possibly heterogeneous beliefs choose their savings portfolios. Under mild assumptions, we establish a choice channel by which greater portfolio choice increases investors' (perceived) return from saving, and induces them to save more. We then investigate the asset pricing implications of the choice channel, which depend on the type of financial innovation. Our main result shows that greater customization, which we capture with improved ability to trade risky assets other than the market portfolio, reduces the expected return on every asset. This result is consistent with the...
 
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