Doug Henwood wrote:
> "Consumer Sentiment and the Stock Market"
>
> BY: MARIA WARD OTOO
> Board of Governors of the Federal Reserve System
>
> Document: Available from the SSRN Electronic Paper Collection:
> http://papers.ssrn.com/paper.taf?abstract_id=205028
>
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> Paper ID: FEDS Working Paper No. 99-60
> Date: November 1999
>
> Contact: MARIA WARD OTOO
> Email: Mailto:m1mwo00 at frb.gov
> Postal: Board of Governors of the Federal Reserve System
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> Washington, DC 20551 USA
> Phone: (202)452-2236
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>
> 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
--
Michael Perelman Economics Department California State University michael at ecst.csuchico.edu Chico, CA 95929 530-898-5321 fax 530-898-5901