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Five Facts about Beliefs and Portfolios

Stefano Giglio (), Matteo Maggiori (), Johannes Stroebel and Stephen Utkus

No 25744, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study a newly-designed survey administered to a large panel of wealthy retail investors. The survey elicits beliefs that are important for macroeconomics and finance, and matches respondents with administrative data on their portfolio composition, their trading activity, and their log-in behavior. 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) Belief changes do not predict when investors trade, but conditional on trading, they 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) Expected cash flow growth and expected returns are positively related, both within and across investors. (5) Expected returns and the subjective probability of rare disasters are negatively related, both within and across investors. These five facts provide useful guidance for the design of macro-finance models.

JEL-codes: E03 E4 F3 G02 G1 H31 (search for similar items in EconPapers)
Date: 2019-04
New Economics Papers: this item is included in nep-mac
Note: AP CF EFG IFM ME PE
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Published as Stefano Giglio & Matteo Maggiori & Johannes Stroebel & Stephen Utkus, 2021. "Five Facts about Beliefs and Portfolios," American Economic Review, American Economic Association, vol. 111(5), pages 1481-1522, May.

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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
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