We present evidence that consumer sentiment has a direct effect on excess aggregate stock returns. We also trace the source of this positive effect and find that public perception over the next year’s economic condition is the most important determinant for the stock market. Our findings...

This paper investigates the relationships between country characteristics and the validity of PPP. We use three alternative time series methods to test for the stationarity of real exchange rates for each of the 72 countries over the period from 1976 to 2005. Our result shows that the evidence...