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Investors' return expectations are pivotal in stock markets, but the reasoning behind these expectations remains a black box for economists. This paper sheds light on economic agents' mental models - their subjective understanding - of the stock market, drawing on surveys with the US general...
Persistent link: https://www.econbiz.de/10014383579
Investors' return expectations are pivotal in stock markets, but the reasoning behind these expectations remains a black box for economists. This paper sheds light on economic agents' mental models - their subjective understanding - of the stock market, drawing on surveys with the US general...
Persistent link: https://www.econbiz.de/10014416010
Analysis of required expected return disclosures by public pension funds in individual asset classes reveals a reliance on past performance in setting return expectations. These extrapolative expectations operate through the expected risk premium and occur across all risky asset classes. Pension...
Persistent link: https://www.econbiz.de/10011976289
Investors' belief updating differs for investments in a gain position versus those in a loss position and by the favorability of the news, leading to a anomalies in investment decisions. We propose a context-sensitive reinforcement learning model unifying these empirical findings. In a...
Persistent link: https://www.econbiz.de/10013491946
Revisions of consensus forecasts of macroeconomic variables positively predict announcement day forecast errors, whereas stock market returns on forecast revision days negatively predict announcement day returns. A dynamic noisy rational expectations model with periodic macroeconomic...
Persistent link: https://www.econbiz.de/10012846330
We develop a dynamic general-equilibrium framework with multiple households and multiple risky assets to explain how less- and more-sophisticated households differ in their portfolio and wealth dynamics. Differences in sophistication are modeled via heterogeneous confidence about asset returns,...
Persistent link: https://www.econbiz.de/10012826864
We provide evidence of a positive causal link between financial knowledge acquired through business education and returns on stock investments. Using exogenous variation generated by admission thresholds to university business programs in Sweden, we document that early investments in financial...
Persistent link: https://www.econbiz.de/10014238293
Using university admission cutoffs that generate exogenous variation in college-major choices, we provide causal evidence that enrollment in a business or economics program leads individuals to invest significantly more in the stock market, earn higher portfolio returns, and ultimately...
Persistent link: https://www.econbiz.de/10014529731
Persistent link: https://www.econbiz.de/10011506157
Persistent link: https://www.econbiz.de/10012006222