Women Feel More Pessimistic Than Men: Empirical Evidence From Turkish Consumer Confidence Index IAFFE 2009 Annual Conference, Boston, USA June, 2009 Aslı KÜÇÜKASLAN and Sadullah ÇELİK Marmara University, İstanbul, Turkey

Outline Introduction Literature Survey Consumer Confidence in Turkey Methodology Empirical Findings Conclusion

Introduction  The recent global financial crisis has underlined the leading role that is an inherent characteristic of economic indicators like consumer confidence.  Consumer confidence surveys try to extract information from respondent agents on past, present and future economic conditions through categorical questions.  It has become interesting to assess whether consumer confidence and financial market variables follow similar patterns during this shaky global environment.

 This nicely built theoretical structure with the power of its elegant methodological tools relies on conventional economic analysis lacking a fundamental part of natural order: the gender effect.  This study is an attempt to analyze the relationship between financial market variables and consumer confidence index not only by checking for the existence of a relationship but also focusing on the possibility of gender response difference.  Our originality is furnished by using an emerging market, namely Turkey, in our empirical analysis.

 Is there a relationship between consumer confidence index and financial markets variables like stock exchange, exchange rates and interest rates for both genders in an emerging economy like Turkey?  If so, do we observe the same pattern for both genders?  What could be the reasons for any divergence between genders?

Literature Literature on consumer confidence  Katona (1960, 1968)  Mishkin (1978)  Carroll et al. (1994)  Huth et al. (1994)  Nahuis (2000)  Jansen & Nahuis (2003)  Ludvigson (2004)  Van Oest & Franses (2008)

Literature on financial market variables  Dornbusch (1975)  Frenkel (1976)  Dornbusch & Fischer (1980)  Meese & Rogoff (1988)  Stavarek (2004)  Bernanke & Kuttner (2005)  Obben et al. (2006)  Çelik & Deniz (2008)

Literature on gender response difference  Dember et al. (1989)  Greene & Hofner (1995)  Powell & Ansic (1997)  Schraedley et al. (1999)  Schubert et al. (1999)  Scheier et al. (2001)  Deere & Doss (2006)  Goldstein (2006)  Charness & Gneezy (2007)

Consumer Confidence Indices in Turkey  CNBC – e Consumer Confidence Index  TURKSTAT – CBRT Consumer Confidence Index

CNBC – e Consumer Confidence Index (CCI)  Base Period = January 2002  Number of Surveys = 704 Consumers (Telephone Call)  Frequency = Monthly ( 27 / 26) = Weekly for our study = Weekly for our study  Announcement = First business day of the month

Survey Criteria  % 70 İstanbul, Ankara, İzmir % 30 other locations % 30 other locations  % 40 ( 18 – 35 Age Group) % 60 ( 36 – 55 Age Group) % 60 ( 36 – 55 Age Group)  % 50 Female - % 50 Male

Survey Criteria  % 50 of the survey is composed of new consumers every month  Maximum of 30 % of the consumers surveyed consecutively  A consumer is surveyed twice at maximum

Survey Questions  CNBC-e CCI is composed of a total of five questions as: Two of them on the current situation of the consumer and the Turkish economy Two of them on the expectations of the consumer about him/herself and the Turkish economy The last question on whether present conditions are suitable to consume durable goods, buy an auto and real estate The last question on whether present conditions are suitable to consume durable goods, buy an auto and real estate

The proposed relationship is between  Consumer Confidence for both genders [CNBC-e CCI-F & CNBC-e CCI-M]  Exchange Rates [$, or ((1$ + 1€)/2) basket]  Stock Exchange Index [ISE100]  Interest Rates [Highest volume bond simple annual] All in logs except the Interest Rates Data Span: January 2003 – January 2008 (Weekly)

Methodology Unit Root Tests Cointegration Analysis Vector Error Correction Model

Empirical Findings

Table VECM for MEN (Cont.) Table VECM for MEN (Cont.)

Table VECM for MEN (Cont.)

Table VECM for WOMEN (Cont.)

Conclusion In an emerging market like Turkey, we show 1) The existence of a long-run relationship (cointegration analysis) 1) The existence of a long-run relationship (cointegration analysis) 2) The existence a short-run relationship (vector error correction model) 2) The existence a short-run relationship (vector error correction model) between consumer confidence and financial market variables, stock exchange, exchange rates and interest rates for both genders. between consumer confidence and financial market variables, stock exchange, exchange rates and interest rates for both genders. However, we also detect the existence of gender response difference through out the period of January 2003 – January 2008 as:

1) Women are more pessimistic than men, due probably to lower levels of purchasing power. 1) Women are more pessimistic than men, due probably to lower levels of purchasing power. 2) Women show a negative response to an increase in stock exchange (whereas men react positively), due probably to lower levels of stock holdings. 2) Women show a negative response to an increase in stock exchange (whereas men react positively), due probably to lower levels of stock holdings. 3) Women respond less (statistically not significant or small coefficient) and rather mixed (+ or -) to changes in exchange rates than men, due probably to lower levels of wealth in foreign exchange holdings. 3) Women respond less (statistically not significant or small coefficient) and rather mixed (+ or -) to changes in exchange rates than men, due probably to lower levels of wealth in foreign exchange holdings.

THANKS FOR YOUR PATIENCE THANKS FOR YOUR PATIENCE The high frequency data has probably more information content and needs to be explored further with different methodological techniques.