Beliefs about the Stock Market and Investment Choices: Evidence from a Survey and a Field Experiment

Christine Laudenbach, Annika Weber, Rüdiger Weber and Johannes Wohlfart

No 9427, CESifo Working Paper Series from CESifo

Abstract: We survey retail investors at an online bank to study how beliefs about the autocorrelation of aggregate stock returns shape investment decisions measured in administrative account data. Individuals’ beliefs exhibit substantial heterogeneity and predict trading responses to market movements. We inform half of our respondents that, historically, the autocorrelation was close to zero, which causes them to update their perceived current autocorrelation and return expectations. The treatment shifts respondents’ equity purchases during the Covid-19 crash months later in the direction implied by the intervention. Our results provide causal evidence on the drivers of disagreement and trade in asset markets.

Keywords: expectation formation; individual investors; trading; field experiment (search for similar items in EconPapers)
JEL-codes: D83 D84 D91 E71 G11 G12 G41 G50 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-cwa and nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9427

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