Analysing the Relationship Between Consumer Confidence Index and Share Market of OECD Countries

Consumers and investors are two segments with some overlapping portions. The relationship between the two have been explored in the past studies. Consumer Confidence Index (CCI) acts as a good economic indicator for representation of consumers while share prices reflect the behaviour of investors in the markets. Earlier researches have taken into account both of these yet the forecasting ability of the relationship remains uncharted, especially in the case of OECD countries. Hence, the present study dived into the relationship between CCI and share prices of OECD countries through ridge regression. Subsequently, Long Short-Term Memory was employed for forecasting purposes. Finally, Granger causality was used for robustness checks. The results suggests that this financial relationship can aid businesses, policymakers, and investors in decision-making, like in the context of reducing bankruptcy rates.