Expectations of Returns and Expected Returns

Robin Greenwood and Andrei Shleifer

No 18686, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We analyze time-series of investor expectations of future stock market returns from six data sources between 1963 and 2011. The six measures of expectations are highly positively correlated with each other, as well as with past stock returns and with the level of the stock market. However, investor expectations are strongly negatively correlated with model-based expected returns. We reconcile the evidence by calibrating a simple behavioral model, in which fundamental traders require a premium to accommodate expectations shocks from extrapolative traders, but markets are not efficient.

JEL-codes: G02 G12 G14 (search for similar items in EconPapers)
Date: 2013-01
New Economics Papers: this item is included in nep-upt
Note: AP CF
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Citations: View citations in EconPapers (22)

Published as Robin Greenwood & Andrei Shleifer, 2014. "Expectations of Returns and Expected Returns," Review of Financial Studies, Society for Financial Studies, vol. 27(3), pages 714-746.

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Journal Article: Expectations of Returns and Expected Returns (2014)
Working Paper: Expectations of Returns and Expected Returns (2014)
Working Paper: Expectations of Returns and Expected Returns
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