Work

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

Year: 2025

Type: article

Abstract: 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 contemporaneous 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 the estimation of its parameters. Our empirical results show that consumer sentiment significantly affects the S&P 500 price–dividend ratio and market volatility in at least one of the model's two regimes, which are associated with endogenously determined low and high consumer sentiment.

Source: Oxford Bulletin of Economics and Statistics

DOI: 10.1111/obes.12682

Authors: Zacharias Psaradakis, Francisco Rapetti, Martin Sola, Patricio Yunis

Institutions: Birkbeck, University of London, Universidad Torcuato Di Tella, University of Pennsylvania

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,840

OpenAlex ID: W4409821323

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Cites: 28

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Related to: 10