Consumer Confidence and Asset Prices: Some Empirical Evidence

Posted: 29 Feb 2008

See all articles by Evgenia Portniaguina

Evgenia Portniaguina

affiliation not provided to SSRN

Michael L. Lemmon

University of Utah - Department of Finance

Multiple version iconThere are 3 versions of this paper

Abstract

We explore the time-series relationship between investor sentiment and the small-stock premium using consumer confidence as a measure of investor optimism. We estimate the components of consumer confidence related to economic fundamentals and investor sentiment. After controlling for the time variation of beta, we study the time-series variation of the pricing error with sentiment. Over the last 25 years, investor sentiment measured using consumer confidence forecasts the returns of small stocks and stocks with low institutional ownership in a manner consistent with the predictions of models based on noise-trader sentiment. Sentiment does not appear to forecast time-series variation in the value and momentum premiums. (JEL G10, G12, G14)

Suggested Citation

Portniaguina, Evgenia and Lemmon, Michael L., Consumer Confidence and Asset Prices: Some Empirical Evidence. The Review of Financial Studies, Vol. 19, Issue 4, pp. 1499-1529, 2006. Available at SSRN: https://ssrn.com/abstract=1097951 or http://dx.doi.org/10.1093/rfs/hhj038

Evgenia Portniaguina

affiliation not provided to SSRN

No Address Available

Michael L. Lemmon (Contact Author)

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States
801-585-5210 (Phone)
801-581-7214 (Fax)

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