Consumer Confidence, Uncertainties, and Risk of the UK Travel and Leisure Industry

Abstract

This study examines the impact of changes in consumer confidence and uncertainty related to economic policy, financial markets, and the crude oil market, on the returns and risk of the UK travel and leisure stock index. Using monthly data from November 2005 to February 2021 and applying quantile regressions and copula-based conditional value-at-risk (CoVaR) measures, the results are as follows. First, consumer confidence and uncertainties significantly impact the travel and leisure index returns across various quantiles, however, the impact is stronger at the left tail than the right tail; furthermore, the sign and magnitude of the impact differ across the various uncertainty measures. Second, there are significant upside and downside extreme risk spillovers from the extreme movements in the consumer confidence and uncertainty indices to travel and leisure index returns, with evidence of an asymmetric impact. Third, the results are influenced by the COVID-19 pandemic and global financial crisis. These findings have implications for market participants, such as portfolio managers, individual and institutional investors, and policymakers in the UK travel and leisure industry.