Consumer Confidence and Asset Prices: Some Empirical Evidence

43 Pages Posted: 22 Dec 2004

See all articles by Michael L. Lemmon

Michael L. Lemmon

University of Utah - Department of Finance

Evgenia V. Golubeva

University of Oklahoma - Division of Finance

Multiple version iconThere are 3 versions of this paper

Date Written: October 13, 2004

Abstract

We estimate fundamental and sentiment components of consumer confidence. In a time-series framework, we model the returns of equity portfolios sorted on various characteristics as a function of the market factor, allowing market beta to vary with the fundamental component of confidence. After controlling for the time variation of betas, we study the time variation of the pricing error with sentiment. Over the last 25 years (which represent relatively active household participation in the equity markets), consumer confidence forecasts returns in a manner consistent with the sentiment - based behavioral hypothesis.

Keywords: Consumer confidence, investor sentiment

JEL Classification: G12, G14

Suggested Citation

Lemmon, Michael L. and Golubeva, Evgenia V., Consumer Confidence and Asset Prices: Some Empirical Evidence (October 13, 2004). Available at SSRN: https://ssrn.com/abstract=605001 or http://dx.doi.org/10.2139/ssrn.605001

Michael L. Lemmon

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)

Evgenia V. Golubeva (Contact Author)

University of Oklahoma - Division of Finance ( email )

307 West Brooks
Room 205A, Adams Hall
Norman, OK 73019
United States
405-325-7727 (Phone)
405-325-7688 (Fax)

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