Only one-fourth of U.S. families own stock. This paper examines whether the consumption of stockholders differs from the consumption of nonstockholders and, if so, 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 and 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.
Mankiw, N., and Stephen Zeldes. "The Consumption of Stockholders and Nonstockholders." Journal of Financial Economics 29, no. 1 (November 1991): 97-112.
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