Can Business Confidence and Consumer Confidence Jointly Explain Stock Market Returns? Evidence from Panel Data
University of Maryland Eastern Shore - School of Business and Technology
August 7, 2013
Advances in Investment Analysis and Portfolio Management [Elsevier], Forthcoming
This study examines if business confidence and consumer confidence can explain variability of stock market returns across countries. Based on the analysis of monthly time series cross-sectional (panel) data from 31 countries, the results show that stock market return goes up by an average of 154 basis points as the change of business confidence increases across time and between countries by one unit when consumer confidence is held constant. Likewise, as the change of consumer confidence increases across time and between countries by one unit, stock market return goes up by an average of 468 basis points while holding business confidence constant. The findings provide empirical evidence of the business confidence and consumer confidence in explaining stock returns across countries. The results provide important implication for stock market valuation, investment and risk management.
Number of Pages in PDF File: 8
Keywords: business confidence, consumer confidence, stock market returns
JEL Classification: G10, G12, G14
Date posted: August 7, 2013
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