Would information on consumer confidence have helped to predict UK household expenditure during the recent economic crisis?

The objective is to investigate whether access to data on consumer confidence would have aided forecasts of the growth of UK household consumption expenditure over the recent period of economic crisis. A disaggregated study is performed on the basis that consideration is given not only to household spending in total but also to expenditure on each of durable goods, semi-durable goods, nondurable goods and services. The empirical analysis demonstrates how modifications which are made to the harmonized indicator of the European Commission are able to enhance predictive accuracy. However, the benefit which is derived from consulting consumer survey data does not extend to an earlier interval over which the behaviour of consumer sentiment was far less volatile.     

Consumer sentiment and countercyclical fiscal policies

We re‐explore the consequences of some popular countercyclical intervention rules in a simple Keynesian‐type macroeconomic model in which the dynamics of consumer sentiment and business cycles are intertwined. We find that fiscal policy does not only have a direct effect on national income via the well‐known Keynesian multiplier process but also an indirect effect by affecting consumer sentiment. The good news is that the indirect effect may amplify the direct effect and therefore increases a policy‐maker’s impact on national income. However, the bad news is that due to the interactions between the business cycle and the evolution of consumer sentiment, the stabilization of national income is an intricate matter.     

Fashion’s Effect on Consumer’s Preference Formation

Abstract:

It is widely known that all principles of economics textbooks do not consider advertising much less fashion a demand determinant factor. Fashion’s effect on consumer choice is a critically important topic to the understanding of consumer behavior and decision-making in the “new economy.” The discussion of such issues includes verifying the effect of three important fashion market features on consumer preference formation and choice, namely the length of product life cycle, demand volatility, and impulse purchasing. It seems that time has come to concede that fashion firms, especially those producing fast or “junk” fashion, if you will, have successfully been affecting consumer preferences and have manipulated consumer choices for the sake of their own interests. Such a goal has been achieved by exploiting the fashion market features by employing specific marketing strategies, within the framework of supply chain agility, such as product remodeling, product customization, and revisions or innovation.     

A mean-variance approach to forecasting with the consumer confidence index

This article refines the way consumer confidence survey data are used in forecasting models. The refinement is easy to describe: it extends existing models by controlling for statistically significant changes in consumer confidence index values. The motivation behind this refinement is simply that not all changes in the confidence index are statistically significant, and mean index values alone provide a noisy signal. Using Michigan Index of Consumer Confidence from 1967 through 2013, we show that controlling for significant versus insignificant changes in the consumer confidence index materially enhances the explanatory power of household expenditure forecasting models.     

The Normative Problem of Merit Goods in Perspective

Abstract

In his Theory of Public Finance (1959), Musgrave invented the concept of merit wants to describe public wants that are satisfied by goods provided by the government in violation of the principle of consumer sovereignty. Starting from Musgrave’s mature discussion (1987), I construct two categories to classify the explanations of merit goods. The first strand of thought attempts to justify merit goods within the New welfare economics, by modifying its assumptions to accommodate irrationality, uncertainty, lack of information, and psychic externalities. The second category encompasses more radical departures from consumer sovereignty, drawn from philosophical critiques of economics. In the third part of the paper, I argue that the two strands might be represented by a non-individualistic social welfare function. I also show how this solution echoes Musgrave’s early views on public expenditures before he coined the concept of merit wants. From an historical perspective, the survival of the concept highlights the persistence of a social point of view in welfare economics.     

The Role of Market Sentiment in Asset Allocations and Stock Returns

Abstract

The authors investigate the role of mutual fund flows in incorporating market sentiment into asset prices. They show that retail investors adjust their investments among mutual fund categories in response to changes in market sentiment. Consistent with sentiment-induced price pressure through fund flows, they further find that firms favored by mutual funds, such as large-cap, dividend payers, and firms with high institutional ownership are sensitive to market sentiment. The authors construct a pricing factor representing sentiment risk and find that the sentiment factor is significant in standard asset pricing models and robust to various sorting procedure.     

Forecasting the Consumer Confidence Index with tree-based MIDAS regressions

The macroeconomic literature has recently uncovered the importance of the consumer confidence variations at driving business cycles. However, it remains a challenge to predict changes in agents'confidence by exploiting the information from ultra high-frequency sentiment data extracted from social media. Based on the mixed data sampling (MIDAS) literature, we propose a new MIDAS method that introduces regression tree-based algorithms into the MIDAS framework. Our method is more flexible at sampling high-frequency lagged regressors compared to existing MIDAS models with tightly parametrized functions of lags. In an out-of-sample forecasting exercise for the Consumer Confidence Index, our results reveal that (i) the proposed procedure exploits more fully the information from historical sentiment data and (ii) our method substantially improves the forecast accuracy and confirms the role of social media at affecting the consumer confidence.     

A Study of Social Network Effects on the Stock Market

Consumer confidence is an economic indicator that measures the degree of optimism that consumers feel about the overall state of the economy as well as their personal financial situation. The authors measure consumer sentiment via analysis of social networks and show that such sentiment affects stock prices; specifically, the S&P 500 and the Dow Jones Industrial Average. Shiller, Fischer and Freidman [1984], Fisher and Statman [2003], and Bremmer [2008] also examine the influence of consumer sentiment, measured from Conference Board data, on the stock market. The authors add to this literature by creating a measure of consumer confidence by utilizing Twitter data and by examining the relationship between our measure of consumer sentiment and the S&P 500 and the Dow. They implemented lexicographic analysis of Twitter data over a three-month period and found that talk intensity of economic issues not only causes shifts in the daily stock market prices, but also has a significant negative effect.     

消费者信心指数与股票市场收益的实证研究

基于行为金融学的视角，研究消费者信心和股票市场收益的互动关系，结果发现消费者信心指数与殷市收益具有较强的相关性。利用脉）辛响应和方差分解分析消费者信心与股市收益之间的互动关系，结果表明，消费者信心指数能预测一部分收益，股市收益与消费者信心指数间的冲击具有不对称性。     

中国消费者信心与消费需求拉动效应的实证分析

美英等国的消费者信心指数(CCI)可预测消费者的行为,也可为宏观经济提供信号传导功能。应用格兰杰因果检验与回归分析,笔者对我国 CCI 与京、津、沪、穗四大城市的社会消费品零售总额之间的关系进行了实证检验。结果表明：我国 CCI 与北京、天津的消费需求存在显著的预测和单向信号引导关系,与上海、广州的消费需求不存在显著因果关系。     

Credit union loan rate determinants in the United States

ABSTRACT

Credit union participation in the consumer lending market continues to grow as an increasing number of consumers and small businesses become members and open accounts. This study investigates the determinants of credit union loan rates during a period of economic expansion in the United States using fourth quarter 2015 data for 5,942 credit unions. Five different interest rate categories are analysed using nine potential loan rate determinants. Results indicate that loan rates tend to be lower as credit union size increases, while high ratios for net charge-offs and operating costs cause interest rates to increase. Opposite to what is expected, loan rates are positively correlated with regional unemployment rates. A possible explanation for this outcome is that weak labour markets are associated with elevated loan delinquency rates and, therefore, greater default risks resulting in higher interest rates.     

Language sentiment in fundamental and noise trading: evidence from crude oil

ABSTRACT

Recent research has found the language sentiment in financial news to be a substantial driver of prices in financial markets, though there are two diametrically opposed interpretations for this: either markets perceive news sentiment as fundamental information (thus leading to changes in the valuation of assets) or news sentiment conveys a noise signal (thus contributing to the stochastic component of prices). The opposite roles are resolved in the context of crude oil prices by decomposing price movements into two components referring to fundamental and noise trading. Contrary to theoretical arguments in prior literature, we find empirical results supporting both interpretations.     

Googling Investor’s Sentiment: Powerful Measure in Conventional and Islamic MENA Financial Markets

ABSTRACT

The objective of this paper is to investigate whether investors' sentiment measured by the Internet search behavior constitutes a valid measure of investor’s sentiment on Islamic and conventional indexes of emerging and frontier financial markets in MENA countries. In fact, we examine the relation between googling investor’s sentiment and monthly Islamic and conventional index returns during the period 2004–2016. Using the Dynamic Conditional Correlation, the BEKK-GARCH and the wavelet coherence models, we confirm that googling investor’s sentiment is a perfect indicator of investor’s sentiment measure. Indeed, we find that this measure has the ability to reflect major events such as subprime financial crisis, oil crisis and Arab spring revolution affecting MENA Islamic and conventional index markets. Our finding indicates that investors can use googling investor’s sentiment as an indicator to predict returns and volatility of emerging and frontier markets since it reflects the behavior and emotions of investors in MENA financial markets.     

An assessment of the contribution of consumer confidence towards household spending decisions using UK data

The European Commission’s consumer confidence indicator (CCI) is assembled from responses to four questions about individual and general economic prospects which form part of the EU’s Consumer Survey. However, concerns may be raised about whether the four components should be constrained to exerting the same influence in a forecasting model of household consumption. Also, in this context, it would seem to be appropriate to permit a role to other information that is obtained from the EU survey. Consequently, in this article, different regression functions are specified in order to assess whether there is any gain to be achieved in predictive accuracy from adopting a more flexible approach towards using the data from the EU questionnaire. With an emphasis upon parsimony, an econometric analysis is performed in conjunction with UK quarterly data on household consumption expenditure. For two categories of spending, it is discovered that the quality of forecasts benefits from having undertaken disaggregation involving survey data beyond those which contribute towards the calculation of the CCI. Indeed, the respective consumption variables (relating to non-durable goods and durable goods excluding vehicles) are seen to be associated with relatively volatile behaviour over the forecast interval, 2008–2013.     

Does confidence data help forecast business cycles? New evidence from Canada

This paper assesses the contribution of confidence – or sentiment – data for predicting Canadian economic slowdowns. A probit framework is applied to an indicator of the status of the Canadian business cycle produced by the OECD. Explanatory variables include all available Canadian data on sentiment (from four distinct surveys) as well as macroeconomic and financial data. Sentiment data are introduced either as individual variables, as simple averages (such as confidence indices) and as confidence factors extracted from larger datasets containing all available sentiment data. Results indicate that the full potential of confidence data for forecasting Canadian business cycles obtains when factor models are used and all confidence data are utilized.     

Does customer satisfaction have directional predictability for U.S. discretionary spending?

Research indicates that past growth in customer satisfaction is an important factor in explaining the in-sample behaviour of growth in discretionary spending. Motivated by such evidence, we take an out-of-sample forecasting approach to examine whether customer satisfaction has directional predictability for two types of discretionary spending. These include spending on motor vehicles and spending on recreation services, which display frequent negative growth for the period 1995–2015. Our results indicate that customer satisfaction accurately predicts the direction of change in both types of spending under symmetric loss. To augment, we further show that the widely reported consumer sentiment has no directional predictability for either types of discretionary spending.     

产品伤害危机处理与品牌资产恢复关系探析

产品伤害危机处理作为企业管理实务的重要内容,对重获消费者满意、重获消费者信任和促进品牌资产恢复具有战略意义,已被越来越多的危机企业所重视。全面了解产品伤害危机的类型及其处理方式的选择与品牌资产恢复的关系,对企业更好的进行危机处理,保留消费者具有重要意义。     

Facilitating Consumer Learning in Insurance Markets: What Are the Welfare Effects?

We model a monopoly insurance market in which consumers can learn their accident risks at a cost c . We then examine the welfare effects of a policy that reduces c . If c is sufficiently small (c  < c ^*), the optimal contract is such that the consumer gathers information. For c  < c ^*, both the insurer and the consumer benefit from a policy that reduces c further. For c   >  c ^*, marginally reducing c hurts the insurer and weakly benefits the consumer. Finally, a reduction in c that is successful, meaning that the consumer gathers information after the reduction but not before it, can hurt both parties.     

Public and private measures of consumer confidence in Turkey： Substitutes or complements

Consumer confidence indices are among the major economic variables as private consumption stands as the major component of aggregate demand in many economies. This is also relevant for an emerging economy like Turkey. ＂What determines consumer confidence？＂ is one of the most popular questions in the literature of consumer surveys. There are two consumer confidence indices regularly released in Turkey. One is released by a private corporation, CNBC-e, in the first day of every month since January 2002. The other one is released by two public institutions, Central Bank of the Republic of Turkey （CBRT） and Turkish Statistical Institute （TURKSTAT）, jointly since 2004. Although the goal is the same for both indices, there are differences between them in terms of the methodology and sampling size. This study has two aims： One is to detect the degree of correlation between these indices which will allow for commenting on the reliability of the indices; The other one is to test the relation between Gross Domestic Product （GDP）, unemployment rate variables and the consumer confidence in Turkey by using both indices.     

The Effect of Changes in Monetary Policy on Consumer and Business Confidence

This article examines the response of consumer and business confidence to five measures of change in Australian monetary policy. Actual, expected and surprise increases in the official cash rate target and related interest rates are shown to negatively impact consumer sentiment. Business confidence is less affected by increases in the cash rate target, but is negatively affected by an increase in the 90-day bank accepted bill rate. Tests for model stability and asymmetries in the response of sentiment to increases and decreases in interest rates otherwise find only limited evidence for monetary policy having a perverse signalling effect on sentiment.