Using survey data on expectations of future stock returns, we recursively estimate the degree of extrapolative weighting in investors' beliefs (DOX). In an extrapolation framework, DOX determines the relative weight investors place on recent-versus-distant past returns. DOX varies considerably...

Ample evidence suggests that individuals are overly optimistic about future outcomes. But does the length of a particular forecast horizon affect optimism levels? In this paper, we extend Brunnermeier and Parker's (2005) optimal expectations framework to a multi-period model, which casts the...

We provide empirical evidence that the optimism bias increases with the forecasting horizon. We label this empirical regularity the horizon bias. In the US and abroad, professional forecasters demonstrate significant horizon bias in their macroeconomic expectations. Our results show a horizon...