Impact of Sentiment on Households' Financial Decision Making

Abstract

The paper investigates the households' sentiment concerning financial decision making based on the micro data from the third wave of the Household Finance and Consumption Survey (HFCS) held in Slovakia in 2017. The aim of the research is to examine the sentiment of Slovak households using HFCS micro data and its impact on household's financial decision making. According to previous research, we assume that positive sentiment increases stock market participation. For the purpose of the research, we created a Sentiment index based on the survey data concerning economic expectations and life satisfaction, as well as Portfolio index based on the households' assets structure. The empirical results indicate a positive and statistically significant influence of sentiment on households' financial portfolios applying Logit and OLS estimates.