Do survey expectations of stock returns reflect risk adjustments?

Klaus Adam, Dmitry Matveev and Stefan Nagel

Journal of Monetary Economics, 2021, vol. 117, issue C, 723-740

Abstract: To reconcile the disconnect between survey expectations of stock returns and rational expectations, researchers have hypothesized that survey participants may confound beliefs and preferences by (i) reporting risk-neutral forecasts of future returns; or (ii) reporting pessimistically-tilted forecasts reflecting ambiguity aversion or robustness concerns. We find that these hypotheses are strongly rejected by the data, albeit for different reasons: Inconsistent with hypothesis (i), survey return forecasts are reliably much higher than risk-free interest rates and survey expected excess returns are predictably time-varying. Inconsistent with (ii), agents are not always pessimistic about future returns, but often predictably optimistic and unconditionally unbiased.

Keywords: Expectations; Asset pricing (search for similar items in EconPapers)
JEL-codes: D84 G12 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Related works:
Working Paper: Do Survey Expectations of Stock Returns Reflect Risk Adjustments? (2019)
Working Paper: Do Survey Expectations of Stock Returns Reflect Risk-Adjustments? (2019)
Working Paper: Do Survey Expectations of Stock Returns Reflect Risk-Adjustments? (2018)
Working Paper: Do Survey Expectations of Stock Returns Reflect Risk-Adjustments? (2018)
Working Paper: Do Survey Expectations of Stock Returns Reflect Risk-Adjustments? (2018)
Working Paper: Do survey expectations of stock returns reflect risk-adjustments? (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:117:y:2021:i:c:p:723-740

DOI: 10.1016/j.jmoneco.2020.04.010

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