Tourism is one of the fastest growing industries in the world, employing approximately 220 million people and generating over 9.4% of the world's GDP. The growing contribution of tourism is accompanied by an increased interest in understanding the major factors which influence visitation levels to those countries. Therefore, finding the right variables to understand and estimate tourism demand becomes very important and challenging in policy formulations. The purpose of this study is to introduce Economic Sentiment Indicator (ESI) to the field of tourism demand studies. Using ESI in demand analysis, this study will assist in the ability to tap into individuals' hopes and/or worries for the present and future. The study developed a demand model in which the number of tourist arrivals to Turkey from select EU countries is used as the dependent variable. ESI along with more traditional variables such as Interest Rate, Relative Price, and Relative Exchange Rate were brought into the model as the independent demand determinants. The study utilized such econometric models as ARIMA for seasonality adjustment and ARDL Bound test approach to cointegration for the long and short-run elasticities. ESI was statistically significant in 8 countries out of 13, three of those countries had a negative coefficient and five had a positive sign as proposed by the study. The study posits that ESI is a good indicator to gauge and monitor tourism demand and adding the visitors' state of mind into the demand equation could reduce errors and increase variance in arrivals. Policy makers should monitor ESI as it fluctuates over time. Since we do not have direct influence on travelers' demand for tourism, it is imperative that we use indirect approaches such as price adjustment and creating new packages or promotional expenditures in order to influence or induce demand. Using this information generated from the study, government officials and tourism suppliers could adjust their promotional activities and expenditures in origin countries accordingly. / Master of Science

Στην παρούσα εργασία μελετούμε τη σχέση μεταξύ χρηματιστηριακών αποδόσεων και δείκτη εμπιστοσύνης στις 27 χώρες-μέλη της ΕΕ για τα έτη 1985-2006. Βρήκαμε ότι για το μεγαλύτερο μέρος των χωρών της ΕΕ εμφανίζεται θετική συσχέτιση μεταξύ αποδόσεων και δείκτη εμπιστοσύνης του καταναλωτή στον βραχυχρόνιο ορίζοντα. Οι μεταβολές και στους δύο δείκτες τείνουν να κινούνται παράλληλα στην ίδια περίοδο, με εξαίρεση την πλειοψηφία των νεοεισελθέντων χωρών. Στον μακροπρόθεσμο ορίζοντα, βρήκαμε ότι για τις περισσότερες χώρες ο συντελεστής γίνεται σχεδόν μηδενικός. Για το μεγαλύτερο μέρος των χωρών της ΕΕ υφίσταται σχέση αιτιότητας μεταξύ των μεταβλητών, με τις αποδόσεις να προκαλούν κατά Granger τον δείκτη εμπιστοσύνης του καταναλωτή και τον δείκτη οικονομικής εμπιστοσύνης, αλλά το αντίστροφο δεν ισχύει. Αμφίδρομη σχέση αιτιότητας μεταξύ αποδόσεων και εμπιστοσύνης των καταναλωτών παρατηρείται μόνο για την Γαλλία οριακά, ενώ για την ΕΕ βρήκαμε οτι υπάρχει αμφίδρομη σχέση αιτιότητας μεταξύ αποδόσεων και δείκτη οικονομικής εμπιστoσύνης. / This paper studies the relationship between stock market developments and confidence index for the 27 EU countries - members over the years 1985-2006. We found that for the majority of the EU countries exists positive correlation between the stock market index and the confidence indicators (consumer confidence indicator and economic sentiment indicator) in the short horizon. The changes between these indexes tempt to move in the same direction contemporaneously and in the short horizon (of 1 month), with the new EU members to be an exception. The correlation becomes almost zero in the long horizon. For the most of the EU countries there is causality between the variables. Stock returns in general Granger-cause the Consumer Confidence Index and the Economic Sentiment Indicator, but not vice versa. We found also that there is feedback causality relationship between stock returns and confidence for France and the EU as a whole.