Do Survey Expectations of Stock Returns Reflect Risk-Adjustments?

Klaus Adam, Dmitry Matveev and Stefan Nagel

No 25122, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E03 G12 G4 (search for similar items in EconPapers)
Date: 2018-10
Note: AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Published as Klaus Adam & Dmitry Matveev & Stefan Nagel, 2020. "Do Survey Expectations of Stock Returns Reflect Risk Adjustments?," Journal of Monetary Economics, .

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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)
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