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Lack of consumer confidence and stock returns

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  • Chen, Shiu-Sheng

Abstract

This paper investigates the link between the lack of consumer confidence and stock returns during market fluctuations. Using a Markov-switching framework, we first focus on whether the shock to consumer confidence has asymmetric effects on stock returns. We also examine whether the decreased confidence pushes the stock market into bear territory. Empirical evidence using monthly returns on Standard & Poor's S&P 500 price index suggests that market pessimism has larger impacts on stock returns during bear markets. Moreover, the lack of consumer confidence leads to a higher probability of switching to a bear market regime.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Empirical Finance.

Volume (Year): 18 (2011)
Issue (Month): 2 (March)
Pages: 225-236

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Handle: RePEc:eee:empfin:v:18:y:2011:i:2:p:225-236

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Web page: http://www.elsevier.com/locate/jempfin

Related research

Keywords: Market pessimism Shocks to consumer confidence Stock returns;

References

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Cited by:
  1. Lee, Hsiu-Chuan & Chang, Shu-Lien, 2013. "Spillovers of currency carry trade returns, market risk sentiment, and U.S. market returns," The North American Journal of Economics and Finance, Elsevier, vol. 26(C), pages 197-216.

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