Personal Finances vs. the Overall Economic Conditions: What Drives the New EU Member States’ Stock Markets?

Abstract

<jats:p>This paper analyses the leading characteristics of the Consumer Confidence Index (CCI) with respect to stock market returns for 11 New EU Member States. It proposes novel CCI weights by minimizing mean squared errors from regression forecasting equations, using CCI lags as regressors. With regards to the obtained “optimal” weights, the examined countries are grouped into micro‑ and macro‑oriented clusters. A strong shift is found in the weights due to the recent recession. The micro aspects (reflecting the wealth effect) severely lose their importance in the crisis, while the consumers’ macroeconomic sentiments grow in significance and constitute a separate transmission channel.</jats:p>

Requiem for a Dream: Perceived Economic Conditions and Subjective Well-Being in Times of Prosperity and Economic Crisis

“…Another related example is Lolić et al (2017), who have shown that the macroeconomic sentiment of the evolution of the national economy-a crucial psychological dimension of consumer confidence-grows significantly during a macroeconomic crisis. Relatedly, Giugni and Mexi (2018) have observed that even if the 2008 recession had few measurable macroeconomic effects on Switzerland's economy, its citizens still experienced its deleterious effects in terms of negative perceptions of economic conditions.…”