 Heterogeneity in households’ stock market beliefsHans-Martin von Gaudecker and Axel Wogrolly Journal of Econometrics, 2022, vol. 231, issue 1, 232-247 Abstract: We analyse a long panel of households’ stock market beliefs to gain insights into the nature of the levels, dynamics, and informativeness of these expectations. In a first step, we classify respondents into one of five groups based on their beliefs data alone. In a second step, we estimate models of expectations at the group level so that belief levels, volatility, and response to information can vary freely across groups. At opposite extremes in terms of optimism we identify pessimists who expect substantially negative returns and financially sophisticated individuals whose expectations are close to the historical average. Two groups expect average returns around zero and differ only in how they respond to information: Extrapolators who become more optimistic following positive information and mean-reverters for whom the opposite is the case. The final group is characterised by its members being unable or unwilling to quantify their beliefs about future returns. Keywords: Stock market expectations; Household finance; Heterogeneity; Clustering methods (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:231:y:2022:i:1:p:232-247 DOI: 10.1016/j.jeconom.2020.11.011 Access Statistics for this article Journal of Econometrics is currently edited by T. Amemiya, A. R. Gallant, J. F. Geweke, C. Hsiao and P. M. Robinson More articles in Journal of Econometrics from Elsevier |
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