Consumer attitudes, stock market liquidity, and the macro economy: A Canadian perspective

K. Smimou

International Review of Financial Analysis, 2014, vol. 33, issue C, 186-209

Abstract: This study addresses the impact of equity market liquidity on Canadian economic growth and investigates how consumer attitudes/sentiments affect the dynamic macro-liquidity relationship. Using various market liquidity proxies (e.g., illiquidity ratio and open interest of equity futures) while controlling for a specific set of variables, we obtain the following main results: we document the predictability role of liquidity on future economic growth, and we find that during periods of high exchange-rate volatility between the Canadian and US dollars, growth becomes highly affected by stock-market liquidity movements. Furthermore, there is some evidence that stock market liquidity contains additional information for estimating the future state of the economy but is conditional on periods of higher positive consumer attitudes—specifically, consumer confidence in the economy. Additionally, we find strong evidence consistently supporting the premise that a positive change in general consumer sentiment exhibits a direct and significant effect on some macro-economic variables including personal consumption, consumer credit, and economic growth.

Keywords: Consumer attitudes; Consumer sentiments; Consumer behavior; Liquidity; Macro-economy; Economic growth; Canadian economy (search for similar items in EconPapers)
JEL-codes: F21 F3 F42 G10 G12 G14 G15 G33 O47 O52 P51 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:33:y:2014:i:c:p:186-209

DOI: 10.1016/j.irfa.2014.02.009

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