Measuring Long-Run Expectations that Correlate with Investment Decisions

Peter Haan, Chen Sun, Georg Weizsäcker and Felix Weinhardt
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Peter Haan: FU Berlin, DIW Berlin, Berlin School of Economics
Georg Weizsäcker: HU Berlin
Felix Weinhardt: European University Viadrina

No 539, Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition

Abstract: Different methods of eliciting long-run expectations yield data that predict economic choices differently well. We ask members of a wide population sample to make a 10-year investment decision and to forecast stock market returns in one of two formats: they either predict the average of annual growth rates over the next 10 years, or they predict the total, cumulative growth that occurs over the 10-year period. Results show that total 10-year forecasts are more pessimistic than average annual forecasts, but they better predict experimental portfolio choices and real-world stock market participation.

Keywords: household finance; long-run predictions; survey experiments (search for similar items in EconPapers)
JEL-codes: D01 D14 D84 D9 (search for similar items in EconPapers)
Date: 2025-07-22
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Working Paper: Measuring Long-Run Expectations that Correlate with Investment Decisions (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:rco:dpaper:539

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