Research on the wealth effect

This is quite interesting:

Now, you might think that broader participation in the stock market would increase the strength of the wealth effect, with more households exposed to market volatility. But this is not quite right. ++New research++ from the Federal Reserve Bank of New York finds that the more widely Americans hold shares, the weaker the effect of a rate change on the real economy, which is the opposite of what you might expect: instinctively, the more people who own stocks, the harder a market swing should hit spending.

In fact, what matters, according to Juan Morelli, a New York Fed researcher, is not how many people own stocks but how concentrated the ownership is. When only a sliver of households own stocks, equity exposure is concentrated among relatively few households. So if a rate rise hits share prices, the resulting wealth shock is larger for each participating household, prompting a bigger reduction in spending.