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Consumer Confidence and Stock Returns

Meir Statman

Santa Clara University - Department of Finance

Kenneth L. Fisher

Fisher Investments, Inc.

August 2002

Santa Clara University Dept. of Finance Working Paper No. 02-02

Financial advisors who worked to restrain exuberant investors in the late 1990s, worked equally hard to lift desperate investors in the early 2000s. Will lower stock prices sap the confidence of consumers? Will lower consumer confidence extinguish all hope for investors?

We study the consumer confidence measures of the Conference Board and the University of Michigan and the investor sentiment measures of the American Association of Individual Investors and Investor's Intelligence. We find that consumers grow confident when investors grow bullish. Consumer confidence declines when stock prices decline but investors need not fear that declines in consumer confidence would be followed by low stocks returns. Low consumer confidence is followed by high stock returns more often than it is followed by low stock returns.

Number of Pages in PDF File: 21

Keywords: Behavioral Finance, forecasting, tactical asset allocation, investor sentiment

JEL Classification: G10, G14

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Date posted: July 21, 2002  

Suggested Citation

Statman, Meir and Fisher, Kenneth L., Consumer Confidence and Stock Returns (August 2002). Santa Clara University Dept. of Finance Working Paper No. 02-02. Available at SSRN: http://ssrn.com/abstract=317304 or http://dx.doi.org/10.2139/ssrn.317304

Contact Information

Meir Statman
Santa Clara University - Department of Finance ( email )
500 El Camino Real
Santa Clara, CA 95053
United States
408-554-4147 (Phone)
408-554-4029 (Fax)
Kenneth L. Fisher (Contact Author)
Fisher Investments, Inc. ( email )
13100 Skyline Blvd.
Woodside, CA 94062
United States
800-851-8845 (Phone)
650-851-3514 (Fax)
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References:  19
Citations:  27

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