Personal Finances vs. the Overall Economic Conditions: What Drives the New EU Member States’ Stock Markets?
DOI:
https://doi.org/10.1515/cer-2017-0031Keywords:
consumer confidence, business and consumer surveys, stock market, numerical optimizationAbstract
This paper analyses the leading characteristics of the Consumer Confidence Index (CCI) with respect to stock market returns for 11 New EU Member States. It proposes novel CCI weights by minimizing mean squared errors from regression forecasting equations, using CCI lags as regressors. With regards to the obtained “optimal” weights, the examined countries are grouped into micro‑ and macro‑oriented clusters. A strong shift is found in the weights due to the recent recession. The micro aspects (reflecting the wealth effect) severely lose their importance in the crisis, while the consumers’ macroeconomic sentiments grow in significance and constitute a separate transmission channel.
Downloads
References
Batchelor R, Dua, P. (1998), Improving macro‑economic forecasts: The role of consumer confidence, ‘International Journal of Forecasting’, Elsevier, Amsterdam, Vol. 14.
Google Scholar
Carroll C.D., Fuhrer J.C., Wilcox D.W. (1994), Does Consumer Sentiment Forecast Household Spending? If So, Why?, ‘American Economic Review’, American Economic Association, New York, Vol. 84.
Google Scholar
European Commission (1997), The Joint Harmonised EU Programme of Business and Consumer Surveys: Reports and studies, ‘European Economy’, Directorate-General for Economic and financial affairs, Brussels, No. 6.
Google Scholar
European Commission (2016), The Joint Harmonised EU Programme of Business and Consumer Surveys: User Guide, ‘European Economy’, Directorate-General for Economic and financial affairs, Brussels.
Google Scholar
Fisher K.L., Statman M. (2002), Consumer Confidence and Stock Returns, ‘Journal of Portfolio Management’, Institutional Investor LLC, New York, Vol. 30.
Google Scholar
Garner A.C. (1991), Forecasting consumer spending: should economists pay attention to consumer confidence surveys?, ‘Federal Reserve Bank of Kansas City Economic Review’, Federal Reserve Bank of Kansas City, Kansas City, No. May/June.
Google Scholar
Goldfarb D., Idnani, A. (1982), Dual and Primal‑Dual Methods for Solving Strictly Convex Quadratic Programs [in:] Hennart, J.P. (eds), Numerical Analysis, Springer-Verlag, Berlin.
Google Scholar
Goldfarb D. and Idnani A. (1983), A numerically stable dual method for solving strictly convex quadratic programs, ‘Mathematical Programming’, Springer, Berlin, Vol. 27.
Google Scholar
Horvath R., Petrovski, D. (2013), International stock market integration: Central and South Eastern Europe compared, ‘Economic Systems’, Elsevier, Amsterdam, Vol. 37.
Google Scholar
Hsu C.C., Lin H.Y., Wu J.Y. (2011), Consumer Confidence and Stock Markets: The Panel Causality Evidence, ‘International Journal of Economics and Finance’, Canadian Center of Science and Education, Toronto, Vol. 3.
Google Scholar
Jansen W.J., Nahuis N.J. (2003), The stock market and consumer confidence: European evidence, ‘Economics Letters’, Elsevier, Amsterdam, Vol. 79.
Google Scholar
Kindleberger C.P., Aliber R.Z. (2011), Manias, Panics and Crashes: A history of financial crises, Palgrave Macmillan, UK.
Google Scholar
Kłopocka A.M. (2016), Does Consumer Confidence Forecast Household Saving and Borrowing Behavior? Evidence from Poland, ‘Social Indicators Research’, Springer, Berlin, Vol. 132(392)
Google Scholar
Lemmon M., Portniaguina E. (2006), Consumer Confidence and Asset Prices: Some Empirical Evidence, ‘The Review of Financial Studies’, Society for Financial Studies, Raleigh, Vol. 19.
Google Scholar
Ludvigson, S.C. (2004), Consumer Confidence and Consumer Spending, ‘Journal of Economic Perspectives’, American Economic Association, New York, Vol. 18.
Google Scholar
Matsusaka J.G., Sbordone A.M. (1995), Consumer confidence and economic fluctuations, ‘Economic Inquiry’, John Wiley & Sons, Ltd., London, Vol. 33.
Google Scholar
Otoo M.W. (1999), Consumer Sentiment and the Stock Market, ‘Federal Reserve System working paper’, https://www.federalreserve.gov/pubs/FEDS/1999/199960/199960pap.pdf (24.6.2016).
Google Scholar
Pretorius E. (2002), Economic determinants of emerging stock market interdependence, ‘Emerging Markets Review’, Elsevier, Amsterdam, Vol. 3.
Google Scholar
Turlach B.A., Weingessel, A. (2015), Quadprog: Functions to solve Quadratic Programming Problems, R package version 1.5–5, https://cran.r-project.org/web/packages/quadprog/quadprog.pdf (20.09.2016).
Google Scholar
Van Raaij, W.F., Gianotten H.J. (1990), Consumer confidence, expenditure, saving, and credit, ‘Journal of Economic Psychology’, Elsevier, Amsterdam, Vol. 11.
Google Scholar
Ypma J., Borchers H.W., Eddelbuettel D., Ypma M.J. (2014), Package ‘nloptr’: R interface to NLop.
Google Scholar
R package version 1.0.4., https://cran.r-project.org/web/packages/nloptr/nloptr.pdf (20.09.2016). Zagórski K., McDonnell J.S. (1995), Consumer Confidence Indexes as Social Indicators, ‘Social Indicators Research’, Springer, Berlin, Vol. 36.
Google Scholar
Downloads
Published
How to Cite
Issue
Section
License

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.