Consumer Confidence Indices and Stock Markets’ Meltdowns

47 Pages Posted: 27 Feb 2012 Last revised: 5 Sep 2014

See all articles by Elena Ferrer

Elena Ferrer

Universidad Pública de Navarra

Julie M. Salaber

University of Bath School of Management

Anna (Ania) Zalewska

University of Bath - Centre for Governance, Regulation and Industrial Strategy; School of Management

Date Written: June 1, 2014

Abstract

Consumer confidence indices (CCIs) are a closely monitored barometer of countries’ economic health, and an informative forecasting tool. Using European and US data, we provide a case study of the two recent stock market meltdowns (the post-dotcom bubble correction of 2000-2002 and the 2007-2009 decline at the beginning of the financial crisis) to contribute to the discussion on their appropriateness as proxies for stock markets’ investor sentiment. Investor sentiment should positively covary with stock market movements (DeLong et al., 1990), however, we find that the CCI-stock market relationship is not universally positive. We also do not find support for the information effect documented in previous literature, but identify a more subtle relationship between consumer expectations about future household finances and stock market fluctuations.

Keywords: consumer confidence, dotcom bubble, financial crisis, stock market reaction, financial literacy

JEL Classification: G00, G15

Suggested Citation

Ferrer, Elena and Salaber, Julie M. and Zalewska, Anna, Consumer Confidence Indices and Stock Markets’ Meltdowns (June 1, 2014). Available at SSRN: https://ssrn.com/abstract=2011762 or http://dx.doi.org/10.2139/ssrn.2011762

Elena Ferrer

Universidad Pública de Navarra ( email )

Campus Arrosadía
Pamplona, Navarra 31006
Spain

Julie M. Salaber

University of Bath School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

Anna Zalewska (Contact Author)

University of Bath - Centre for Governance, Regulation and Industrial Strategy; School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom
+44 0 1225 384354 (Phone)
+44 0 1226 384354 (Fax)

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