Wealth effect

Definition:

The impact of changes in actual or perceived value of assets on consumption decisions. Changes in wealth that are perceived to be temporary will have a smaller effect on consumption expenditures than changes in wealth that are deemed permanent.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Bundling, unbundling

Creation of securities either by combining primitive and derivative securities into one composite hybrid or by separating returns on an asset into classes.

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