Can Business Confidence and Consumer Confidence Jointly Explain Stock Market Returns? Evidence from Panel Data

Sum, V., Ali, M., & Das, M. (2016). Can business confidence and consumer confidence jointly explain stock market returns? Evidence from panel data. Advances in Investment Analysis and Portfolio Management, 7, 1-7.

9 Pages Posted: 7 Aug 2013 Last revised: 2 Mar 2016

Vichet Sum

University of Maryland Eastern Shore - School of Business and Technology

Mohammad Ali

University of Maryland Eastern Shore - School of Business and Technology

Monisha Das

University of Maryland Eastern Shore - School of Business and Technology

Date Written: August 7, 2013

Abstract

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.

Keywords: business confidence, consumer confidence, stock market returns

JEL Classification: G10, G12, G14

Suggested Citation

Sum, Vichet and Ali, Mohammad and Das, Monisha, Can Business Confidence and Consumer Confidence Jointly Explain Stock Market Returns? Evidence from Panel Data (August 7, 2013). Sum, V., Ali, M., & Das, M. (2016). Can business confidence and consumer confidence jointly explain stock market returns? Evidence from panel data. Advances in Investment Analysis and Portfolio Management, 7, 1-7.. Available at SSRN: https://ssrn.com/abstract=2306950

Vichet Sum (Contact Author)

University of Maryland Eastern Shore - School of Business and Technology ( email )

2105 Kiah Hall
Princess Anne, MD 21853
United States
410-651-6531 (Phone)
410-651-6529 (Fax)

HOME PAGE: http://www.umes.edu/bma/Sum.html

Mohammad Ali

University of Maryland Eastern Shore - School of Business and Technology ( email )

2105 Kiah Hall
Princess Anne, MD 21853
United States
410-651-6213 (Phone)
410-651-6032 (Fax)

HOME PAGE: http://www.umes.edu/bma/ALI.html

Monisha Das

University of Maryland Eastern Shore - School of Business and Technology ( email )

2105 Kiah Hall
Princess Anne, MD 21853
United States
410 651 7886 (Phone)
410 651 2593 (Fax)

HOME PAGE: http://https://www.umes.edu/bma/Das.html

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