The Role of Consumer Sentiment in the Stock Market: A Multivariate Dynamic Mixture Model with Threshold Effects

Zacharias Psaradakis (), Martin Sola, Francisco Rapetti () and Patricio Yunis ()
Authors registered in the RePEc Author Service: Nicola Spagnolo

Department of Economics Working Papers from Universidad Torcuato Di Tella

Abstract: We consider the relationship between stock prices, volatility and consumer sentiment. The analysis is based on a new multivariate model defined as a time-varying mixture of dynamic models in which instantaneous relationships among variables are allowed and the mixing weights have a threshold-type structure. We discuss issues related to the stability of the model and estimation of its parameters. Our empirical results show that consumer sentiment affects significantly the S&P 500 price–dividend ratio and market volatility in at least one of the two regimes identified by the model, regimes which are associated with endogenously determined low and high consumer sentiment.

Keywords: Consumer sentiment; Mixture models; Price–dividend ratio; Threshold; Time-varying weights; Volatility. (search for similar items in EconPapers)
JEL-codes: C32 G12 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2024-04
New Economics Papers: this item is included in nep-ecm and nep-ets
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Persistent link: https://EconPapers.repec.org/RePEc:udt:wpecon:2024_01

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