The Stock Market and the Consumer Confidence Channel in Canada

Lilia Karnizova and Hashmat Khan ()

No 10-08, Carleton Economic Papers from Carleton University, Department of Economics

Abstract: This paper provides new evidence on the relations between the stock market and consumer behavior in Canada. It differentiates between two channels of stock price transmission: a direct wealth channel that operates through changes in wealth and an indirect consumer confidence channel that affects consumption through changes in consumer optimism. The two channels are evaluated by testing the ability of stock prices to predict consumer confidence measures. The hypothesis that stock prices are transmitted only through the wealth channel is rejected at the national and regional levels. Furthermore, confidence measures respond more strongly to stock prices declines than to increases.

Keywords: Stock market; Consumer confidence; Wealth; Asymmetry (search for similar items in EconPapers)
JEL-codes: E21 E44 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2010-09-27, Revised 2011-08-26
New Economics Papers: this item is included in nep-mac
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Published: Carleton Economic Papers

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Working Paper: The Stock Market and the Consumer Confidence Channel in Canada (2010)
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