EconPapers    
Economics at your fingertips  
 

Five Facts About Beliefs and Portfolios

Stefano Giglio (), Matteo Maggiori (), Johannes Ströbel and Stephen Utkus
Authors registered in the RePEc Author Service: Johannes Stroebel

No 13657, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We administer a newly-designed survey to a large panel of retail investors who have substantial wealth invested in financial markets. The survey elicits beliefs that are crucial for macroeconomics and finance, and matches respondents with administrative data on their portfolio composition and their trading activity. We establish five facts in this data: (1) Beliefs are reflected in portfolio allocations. The sensitivity of portfolios to beliefs is small on average, but varies significantly with investor wealth, attention, trading frequency, and confidence. (2) It is hard to predict when investors trade, but conditional on trading, belief changes affect both the direction and the magnitude of trades. (3) Beliefs are mostly characterized by large and persistent individual heterogeneity; demographic characteristics explain only a small part of why some individuals are optimistic and some are pessimistic. (4) Investors who expect higher cash flow growth also expect higher returns and lower long-term price-dividend ratios. (5) Expected returns and the subjective probability of rare disasters are negatively related, both within and across investors. These five facts challenge the rational expectation framework for macro-finance, and provide important guidance for the design of behavioral models.

Date: 2019-04
New Economics Papers: this item is included in nep-fmk and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33) Track citations by RSS feed

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=13657 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Five Facts about Beliefs and Portfolios (2021) Downloads
Working Paper: Five facts about beliefs and portfolios (2019) Downloads
Working Paper: Five Facts about Beliefs and Portfolios (2019) Downloads
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:cpr:ceprdp:13657

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... rs/dp.php?dpno=13657

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

 
Page updated 2022-08-20
Handle: RePEc:cpr:ceprdp:13657