The Stock Market and the Consumer Confidence Channel in Canada
This paper provides new evidence on the relations between the stock market and consumer behavior in Canada. It differentiates between two channels of stock price transmission: a direct wealth channel that operates through changes in wealth and an indirect consumer confidence channel that affects consumption through changes in consumer optimism. The two channels are evaluated by testing the ability of stock prices to predict consumer confidence measures. The hypothesis that stock prices are transmitted only through the wealth channel is rejected at the national and regional levels. Furthermore, confidence measures respond more strongly to stock prices declines than to increases.
|Date of creation:||27 Sep 2010|
|Date of revision:||26 Aug 2011|
|Publication status:||Published: Carleton Economic Papers|
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