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 of the stock market wealth effect on consumption 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 3.2 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 1.7% and ag...
October 2015The Choice Channel of Financial Innovation
with Felipe S. Iachan, Alp Simsek: w21686
Financial innovation in recent decades has expanded portfolio choice. We investigate how greater choice affects investors’ savings and asset returns. We establish a choice channel by which greater portfolio choice increases investors’ savings—by enabling them to earn the aggregate risk premium or to take speculative positions. In equilibrium, portfolio customization (access to risky assets beyond the market portfolio) reduces the risk-free rate. Participation (access to the market portfolio) reduces the risk premium but typically increases the risk-free rate. Empirically, stock market participants in the U.S. save more than nonparticipants, and have increasingly dispersed portfolio returns, consistent with the choice channel.
 
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