Five Facts About Beliefs and Portfolios

Matteo Maggiori, Ströbel, Johannes, Stefano Giglio and Stephen P. Utkus
Authors registered in the RePEc Author Service: Johannes Stroebel

No 13657, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We administer a newly-designed survey to a large panel of wealthy retail investors. The survey elicits beliefs that are important for macroeconomics and finance, and matches respondents with administrative data on their portfolio composition, their log-in behavior, and their trading activity. We establish five facts in this data: (1) Beliefs are reflected in portfolio allocations. The sensitivity of portfolios to beliefs is small on average, but varies significantly with investor wealth, attention, trading frequency, and confidence. (2) Belief changes do not predict when investors trade, but conditional on trading, they affect both the direction and the magnitude of trades. (3) Beliefs are mostly characterized by large and persistent individual heterogeneity; demographic characteristics explain only a small part of why some individuals are optimistic and some are pessimistic. (4) Expected cash flow growth and expected returns are positively related, both within and across investors. (5) Expected returns and the subjective probability of rare disasters are negatively related, both within and across investors. These five facts provide useful guidance for the design of macro-finance models.

Date: 2019-04
New Economics Papers: this item is included in nep-fmk and nep-rmg
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Citations: View citations in EconPapers (43)

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Related works:
Journal Article: Five Facts about Beliefs and Portfolios (2021)
Working Paper: Five facts about beliefs and portfolios (2019)
Working Paper: Five Facts about Beliefs and Portfolios (2019)
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