Wealth effect and investor sentiment

I-Chun Tsai

The North American Journal of Economics and Finance, 2016, vol. 38, issue C, 111-123

Abstract: This paper investigated the relationship between the U.S. stock and housing markets as well as their influence on the wealth effect of consumption and found that the stock market sentiment index can explain changes in the wealth effect. The empirical results indicate that these two markets exert a wealth effect on consumption. The estimation results of the Markov-switching model indicate two states: a state in which the stock market influences its coexistence with the housing market and a state in which the housing and stock markets are unrelated. Public optimism regarding stock market investments affects the probability of transitioning between these states.

Keywords: Wealth effect; Investor sentiment; Optimistic sentiment; Capital switching; Markov-switching model (search for similar items in EconPapers)
JEL-codes: G10 G11 R31 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:38:y:2016:i:c:p:111-123

DOI: 10.1016/j.najef.2016.09.001

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