Changes in the risk structure of stock returns: Consumer Confidence and the dotcom bubble

Lawrence Leger and Vitor Leone

Review of Financial Economics, 2008, vol. 17, issue 3, 228-244

Abstract: Changes in the risk structure of stock returns may sometimes be very revealing. We examine economic variables that help explain principal components in UK stock returns, 01/1985 to 12/2001. The loading pattern on explanatory variables for the first component in a ‘bubble’ period is distinctive and consistent with a bubble/crash market. The second component shows a loading pattern on a Consumer Confidence variable in a pre‐bubble period only. We observe apparently systematic changes in the structure of risk, and conjecture that Consumer Confidence captures a change in market sentiment that could be a signal for the evolution of stock prices.

Date: 2008
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https://doi.org/10.1016/j.rfe.2007.08.001

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Journal Article: Changes in the risk structure of stock returns: Consumer Confidence and the dotcom bubble (2008)
Working Paper: Changes in the risk structure of stock returns. Consumer Confidence and the Dotcom Bubble (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:revfec:v:17:y:2008:i:3:p:228-244

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