Do Survey Expectations of Stock Returns Reflect Risk-Adjustments?

Klaus Adam, Dmitry Matveev and Stefan Nagel

No 7285, CESifo Working Paper Series from CESifo

Abstract: Motivated by the observation that survey expectations of stock returns are inconsistent with rational return expectations under real-world probabilities, we investigate whether alternative expectations hypotheses entertained in the asset pricing literature are consistent with the survey evidence. We empirically test (1) the notion that survey forecasts constitute rational but risk-neutral forecasts of future returns, and (2) the notion that survey forecasts are ambiguity averse/robust forecasts of future returns. We find that these alternative hypotheses are also strongly rejected by the data, albeit for different reasons. Hypothesis (1) is rejected because survey return forecasts are not in line with risk-free interest rates and because survey expected excess returns are predictable. Hypothesis (2) is rejected because agents are not always pessimistic about future returns, instead often display overly optimistic return expectations. We speculate as to what kind of expectations theories might be consistent with the available survey evidence.

Keywords: survey expectations; expected stock returns (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp7285.pdf (application/pdf)

Related works:
Journal Article: Do survey expectations of stock returns reflect risk adjustments? (2021)
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)
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:ces:ceswps:_7285

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().