Do financial market experts know their theory? New evidence from survey data

Frank Brückbauer

No 20-092, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: Using a unique survey dataset, I study how financial market experts form their stock market expectations. I document a strong disagreement among experts about how important macroeconomic and financial variables are related to stock returns. The results of an analysis of the relationships between my main survey measure of expected returns and measures of economic conditions are largely consistent with the view that expected returns are counter-cyclical. In particular, I find a positive relationship between expected returns and the dividend-price ratio, which is at odds with the findings of previous papers studying survey measures of expected returns. Finally, I find that an aggregated measure of the financial market experts' stock return forecasts has weak predictive power for actual returns, but is a less precise forecast than a simple average of historical stock returns.

Keywords: stock market expectations; survey data; macro-finance; stock return predictability (search for similar items in EconPapers)
JEL-codes: D84 G12 (search for similar items in EconPapers)
Date: 2022, Revised 2022
New Economics Papers: this item is included in nep-cwa
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:20092

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