Crash Beliefs From Investor Surveys

William Goetzmann, Dasol Kim and Robert Shiller

No 22143, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Historical data suggest that the base rate for a severe, single-day stock market crash is relatively low. Surveys of individual and institutional investors, conducted regularly over a 26-year period in the United States, show that they assess the probability to be much higher. We examine factors influencing investor responses and test the role of media influence, finding evidence consistent with an availability bias. Adverse market events made salient by financial press are associated with higher subjective crash probabilities. Exogenous shocks related to earthquakes are also associated with higher probabilities. Finally, subjective crash probabilities are negatively associated with mutual fund flows.

JEL-codes: E03 G00 G02 G11 G23 (search for similar items in EconPapers)
Date: 2016-04
Note: AP
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Citations: View citations in EconPapers (22)

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