Revista Internacional de Economia e Ciências de Gestão

Relationship between the Stock Market Index and Consumer Confidence after the 2007-2008 Financial Crisis

Abstract

Hanitra Rakotondramaro

The paper investigates potential Granger causality between the stock market index (SMI) and the consumer confidence (sentiment) index (CSI) for the period between 2007 and 2013. While studying SMI-CSI relations, the model is calibrated for US data (S&P500 and the Michigan Survey Research Centre measures of consumer confidence) and shows causality is from the stock market index to consumer confidence. This result is a consequence of the stock market index towards the consumers’ attitudes, as they consider the index to be the leading indicator of the future situation, regardless of whether they own stocks or not. They also maintain a degree of optimism regarding the future economic situation.