The study shows that during tough economic times, the growth of dividends and stock market returns in the U.S. is closely linked to how much people are spending. By using a model with a cautious investor and small, random changes in spending, the researchers found that this connection helps explain why stocks can be a good investment even when people aren't very risk-averse. The model also explains why stock prices can be more volatile than expected and why future returns can sometimes be predicted.