Abstract
We show that net equity payouts from the corporate sector play a crucial role in helping individuals manage their consumption path across the business cycle. In particular, we show that, as investors' desire to smooth consumption increases, optimal aggregate dividends become both more volatile and more counter-cyclical to help counterbalance pro-cyclical labor income. These findings are robust to whether or not agency conflicts exist in the economy.
Original language | English |
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Journal | International Review of Financial Analysis |
Volume | In press |
Early online date | 14 Aug 2015 |
DOIs | |
Publication status | Published - 2015 |
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Keywords
- aggregate dividend policy
- consumption smoothing
- dynamic stochastic general equilibrium models
- habit formation
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Aggregate dividends and consumption smoothing. / Huang-Meier, Winifred; Freeman, Mark C.
In: International Review of Financial Analysis, Vol. In press, 2015.Research output: Contribution to journal › Article
TY - JOUR
T1 - Aggregate dividends and consumption smoothing
AU - Huang-Meier, Winifred
AU - Freeman, Mark C.
PY - 2015
Y1 - 2015
N2 - We show that net equity payouts from the corporate sector play a crucial role in helping individuals manage their consumption path across the business cycle. In particular, we show that, as investors' desire to smooth consumption increases, optimal aggregate dividends become both more volatile and more counter-cyclical to help counterbalance pro-cyclical labor income. These findings are robust to whether or not agency conflicts exist in the economy.
AB - We show that net equity payouts from the corporate sector play a crucial role in helping individuals manage their consumption path across the business cycle. In particular, we show that, as investors' desire to smooth consumption increases, optimal aggregate dividends become both more volatile and more counter-cyclical to help counterbalance pro-cyclical labor income. These findings are robust to whether or not agency conflicts exist in the economy.
KW - aggregate dividend policy
KW - consumption smoothing
KW - dynamic stochastic general equilibrium models
KW - habit formation
UR - http://www.scopus.com/inward/record.url?scp=84941005989&partnerID=8YFLogxK
U2 - 10.1016/j.irfa.2015.08.008
DO - 10.1016/j.irfa.2015.08.008
M3 - Article
AN - SCOPUS:84941005989
VL - In press
JO - International Review of Financial Analysis
JF - International Review of Financial Analysis
SN - 1057-5219
ER -