The Wealth-Consumption Ratio and the Consumption-Habit Ratio
财富—消费比与消费—习惯比
Recent research finds that the ratio of aggregate wealth to consumption emerges as a strong forecaster of stock returns. This article reports that the wealth-consumption ratio remains as a strong predictor of stock returns at the presence of the consumption-habit ratio. Most of the variability of the wealth-consumption ratio is not related to the movements of the lagged, contemporaneous, or leading consumption-habit ratios. The results reject the hypothesis that the…