Consumer Sentiment and the Stock Market
20 Pages Posted: 21 May 2000
Date Written: November 1999
Abstract
This paper examines the relationship between movements in consumer sentiment and stock prices. At the aggregate level, the two share a strong contemporaneous relationship an increase in equity values boosts sentiment. However, I also sought to examine the nature of the relationship between the two. Does an increase in stock prices raise aggregate sentiment because people are wealthier or because they use movements in stock prices as an indicator of future economic activity and potential labor income growth? Using individual observations from the Michigan survey I found results more consistent with the view that people use movements in equity prices as a leading indicator. Although the findings do not rule out a traditional wealth effect, they do raise some questions about the causal role of wealth in aggregate spending.
Keywords: consumer sentiment, stock market, Michigan survey
JEL Classification: D12
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Paper statistics
Recommended Papers
-
Investor Sentiment and the Cross-Section of Stock Returns
By Malcolm P. Baker and Jeffrey Wurgler
-
Investor Sentiment and the Cross-Section of Stock Returns
By Malcolm P. Baker and Jeffrey Wurgler
-
Investor Sentiment and the Cross-Section of Stock Returns
By Malcolm P. Baker and Jeffrey Wurgler
-
Investor Sentiment and the Cross-Section of Stock Returns
By Malcolm P. Baker and Jeffrey Wurgler
-
Investor Sentiment and the Cross-Section of Stock Returns
By Malcolm P. Baker and Jeffrey Wurgler
-
How Does Investor Sentiment Affect the Cross-Section of Stock Returns?
By John Wang, Jeffrey Wurgler, ...
-
Market Liquidity as a Sentiment Indicator
By Malcolm P. Baker and Jeremy C. Stein
-
Market Liquidity as a Sentiment Indicator
By Malcolm P. Baker and Jeremy C. Stein
-
Investor Sentiment in the Stock Market
By Malcolm P. Baker and Jeffrey Wurgler
-
Investor Sentiment in the Stock Market
By Malcolm P. Baker and Jeffrey Wurgler