This paper examines the relationship between movements in consumer sentiment and stock prices. At the aggregate level, the two share a strong contemporaneous relationship: an increase in equity values boosts sentiment. However, I examined the nature of the relationship between the two. Does an increase in stock prices raise aggregate sentiment because people are wealthier or because they use movements in stock prices as an indicator of future economic activity and potential labor income growth? Using individual observations from the Michigan survey I found results more consistent with the view that people use movements in equity prices as a leading indicator. Although the findings do not rule out a traditional wealth effect, they do raise some questions about the causal role of wealth in aggregate spending.

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We address the construction of price indexes for consumer vehicles using data collected from a national sample of dealerships. The dataset contains highly disaggregate data on actual sales prices and quantities, along with information on customer cash rebates, financing terms, and much more. Using these data, we are able to capture the actual cash and financing incentives taken by consumers, and we demonstrate that their inclusion in measures of consumer vehicle prices is important. We also document other features of retail vehicle markets that interact and overlap with price measurement issues. In particular, we construct vehicle price indexes under different assumptions about what constitutes a Anew@ product in moving from one model year to the next. For the period that we study (1999 to 2003), a period during which incentives became more widespread and new model introductions rose, our preferred price index drops faster than the CPI for new vehicles.

We address the construction of price indexes for consumer vehicles using data collected from a national sample of dealerships. The dataset contains highly disaggregate data on actual sales prices and quantities, along with information on customer cash rebates, financing terms, and much more. Using these data, we are able to capture the actual cash and financing incentives taken by consumers, and we demonstrate that their inclusion in measures of consumer vehicle prices is important. We also document other features of retail vehicle markets that interact and overlap with price measurement issues. In particular, we construct vehicle price indexes under different assumptions about what constitutes a Anew@ product in moving from one model year to the next. For the period that we study (1999 to 2003), a period during which incentives became more widespread and new model introductions rose, our preferred price index drops faster than the CPI for new vehicles.