Long-run Expectations of Households

Christoph Breunig, Iuliia Grabova, Peter Haan, Felix Weinhardt () and Georg Weizsäcker
Additional contact information
Christoph Breunig: Emory University
Iuliia Grabova: HU and DIW Berlin
Peter Haan: FU and DIW Berlin

No 218, Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition

Abstract: The rational expectations assumption, e.g. in life-cycle models and portfolio-choice models, prescribes agents to have model-consistent beliefs and to avoid systematic prediction errors. In reality, justication and identication of expectations are nontrivial. One way to solve this problem is to elicit expectations collecting survey data. We utilize the German SOEP Innovation Sample to analyze short-run and long-run expectations of households in three different domains: stock market, labor market and housing market. Our main contribution to the existing literature is that we study expectations about price developments over longer periods, which is of central relevance since many important economic decisions of households concern the long run. Previous studies have mainly focused on short-run or medium-run expectations. We document that while expectations about wages are similar to historical values, the long-run expectations about the developments of the stock market index and about house prices are strongly pessimistic. In the case of the stock market, respondents expect only a small percentage of historical growth. We also observe substantial heterogeneity of expectations by socio-economic background.

Keywords: long-run expectations; biased beliefs; returns to education (search for similar items in EconPapers)
JEL-codes: D63 H23 I24 I38 J22 J31 (search for similar items in EconPapers)
Date: 2019-12-16
New Economics Papers: this item is included in nep-cwa
References: Add references at CitEc
Citations:

Downloads: (external link)
https://rationality-and-competition.de/wp-content/uploads/2019/12/218.pdf (application/pdf)

Related works:
Journal Article: Long-run expectations of households (2021)
Journal Article: Long-run expectations of households (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rco:dpaper:218

Access Statistics for this paper

More papers in Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition
Bibliographic data for series maintained by Viviana Lalli ().