The Stock Market and Consumer Confidence: European Evidence
AbstractThis paper studies the (short-run) relationship between stock market developments and consumer confidence in eleven European countries over the years 1986-2001. We find that stock returns and changes in sentiment are positively correlated for nine countries, with Germany as the main exception. Moreover, stock returns generally Granger-cause consumer confidence at very short horizons (two weeks to one month), but not vice versa. The stock market-confidence relationship is driven by expectations about economy-wide conditions rather than personal finances. This suggests that the confidence channel is not part of the conventional wealth effect, but a separate transmission channel.
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Bibliographic InfoPaper provided by Netherlands Central Bank, Monetary and Economic Policy Department in its series MEB Series (discontinued) with number 2002-11.
Date of creation: Aug 2002
Date of revision:
consumer confidence; stock market; wealth effect;
Other versions of this item:
- Jansen, W. Jos & Nahuis, Niek J., 2003. "The stock market and consumer confidence: European evidence," Economics Letters, Elsevier, vol. 79(1), pages 89-98, April.
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-08-17 (All new papers)
- NEP-EEC-2003-08-17 (European Economics)
- NEP-FIN-2003-08-17 (Finance)
- NEP-FMK-2003-08-17 (Financial Markets)
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