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Review of Financial Studies Vol. 35 No. 6 2022

Consumption Imputation Errors in Administrative Data

Scott Baker1; Lorenz Kueng2; Steffen Meyer3; Michaela Pagel4

1 Kellogg School of Management, Northwestern University, and NBER · 2 Universita della Svizzera italiana (USI Lugano), Swiss Finance Instutute (SFI) , NBER, and CEPR · 3 University of Southern Denmark and Danish Finance Institute (DFI) · 4 Columbia Business School, NBER, and CEPR ,

Abstract

Many research papers in household finance utilize annual snapshots of household wealth from administrative data, such as tax registries, to calculate “imputed consumption.” However, trading costs, unobserved intrayear trades, or unobserved security characteristics may cause measurement error. We document how such errors vary across groups of individuals by income, portfolio characteristics, and wealth and how they are correlated with individual income and balance sheets, asset prices, and the business cycle using transaction-level retail brokerage account data. We find that the economic significance of imputation error is small in many research settings, and we discuss robustness checks and econometric specifications to minimize the impact of imputation error in future research.

DOI
10.1093/rfs/hhab087
Volume
35
Issue
6
Pages
3021-3059
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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