Non-Additivity of Subjective Expectations over Different Time Intervals

Peter Haan, Chen Sun, Uwe Sunde and Georg Weizsäcker

No 4, Berlin School of Economics Discussion Papers from Berlin School of Economics

Abstract: We examine the additivity of stock-market expectations over different time intervals. When asked about a ten-year interval, survey respondents expect a stock-price change that is not equal to, but closer to zero than, the sum of their expectations over two shorter time intervals that cover the same ten years. Such sub-additivity is irrational in that it cannot stem from aggregating short-term expectations. Model estimates show that the pattern is consistent with a time perception where shorter time intervals have a proportionally larger weight. We also find that the respondents’ degree of additivity is correlated with making larger financial investments.

Keywords: Expectation Formation; Time perception; Sub-additivity; Super-additivity (search for similar items in EconPapers)
JEL-codes: D01 D14 D84 D9 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2022-12-09
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Related works:
Working Paper: Non-Additivity of Subjective Expectations over Different Time Intervals (2022)
Working Paper: Non-Additivity of Subjective Expectations over Different Time Intervals (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:bdp:dpaper:0004

DOI: 10.48462/opus4-4660

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