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Despite of its importance for the economy, stock ownership by households is poorly under-stood. Recent research has uncovered that expectations of stock market returns by individuals strongly correlate with stock ownership. This paper reports new …ndings from a survey which contains novel data on stock-market return expectations, individual informa...
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... survey was conducted in March 2007. Figure 1 below shows that after a drop of nearly 60% in the French stock market Index (CAC-40) caused by the 'dot-com crash'of 2001, by the time the survey was conducted, the stock market index had been steadily recovering since the mid 2002. In March 2007 the index was still below its 'dot-com' peak. ...
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... four panels ((a) -(d)) of Figure 19 in the appendix illustrate how do elicited probability den- sity functions look like for a small subset of individuals. Figure 3 below depicts the histogram, which averages the individual probability density functions of those who answered. ...
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... Figure 11, we depict the frequency distribution of responses to pPNR for all ages. As previously, there is hipping of responses around round numeric probability answers indicating that rounding is not speci…c to forward looking questions but rather, to respondents rounding when confronted with the probabilistic elicitation format. ...
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... sample respondents (990 individuals) gave an answer consistent with the truth. In Figure 12 we examine what type of information had those respondents who were absolutely certain regarding the future evolution of the stock market (see panel (b), Figure 4). Panel (a) shows that amongst those who were absolutely certain that the stock market would go down (24%, 567 answered PNR=0%), around 35% were absolutely certain that it had not increased over the last 5 years, while 43% were absolutely certain that it had gone up. ...
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... 3 reports the distribution of responses and the response rate conditioning on age, gender percentage points, and are around 6 percentage points more likely to give a response. Figure 13 shows that males are broadly better informed than females. Information about past stock market performance sharply increases with age until the mid 40s, mildly increases until the mid 70s, and then decreases, although the point estimates are much noisier. ...
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... about past stock market performance sharply increases with age until the mid 40s, mildly increases until the mid 70s, and then decreases, although the point estimates are much noisier. Figure 14 remains roughly constant until the 90th percentile (e413,476), only to increase again albeit very heterogeneously. The richest households (with wealth above the 90th percentile), may thus be more optimistic (and disagree more) regarding the future investment opportunities because they are better (and more heterogeneously) informed. ...
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... 6 For the 35-55 year-olds corresponding subsample in the Patrimoine 1998 INSEE survey, the proportion of house-at that time. In Figure 17, stock market participation amongst respondents displays a clear hump- shaped pattern by age. The literature on household …nance has found that those who are better educated, older and wealthier, are more likely to hold stocks. ...
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... results, together with Figure 14, lend support to King and Leape (1987) and Hurd's (2009) conjectures: what determines stock market participation amongst the young is their degree of awareness regarding the investment opportunities the stock market o¤ers, proxied by the likelihood that the stock market has gone up over the last …ve years (pPNR) 29 . 30 Table 8 reports estimated marginal e¤ects for the same speci…cation as in Table 5 2) is larger with a narrower de…nition of stock ownership. ...
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... predicted OLS residual is the conditional probability of a positive nominal return over the next …ve years. It is plotted in Figure 16 in the appendix, which broadly displays a hump-shaped pattern by age. In unreported estimations, we replaced PNR and pPNR in the main probit speci…cation by the conditional probability thus computed. ...
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... extract the information component from subjective expectations, by regressing expectations (PNR i ) on information (pPNR i ), and recover the predicted residuals, b i ; which are plotted by age in Figure 18. ...
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Citations
We study asset prices and portfolio choice with overlapping generations, where the young disregard history to learn from own experience. Disregarding history implies less precise estimates of output growth, which in equilibrium leads the young to increase their investment in risky assets after positive returns, that is, they act as trend chasers. In equilibrium, the risk premium decreases after a positive shock and, therefore, trend chasing young agents lose wealth relative to old agents who behave as contrarians. Consistent with findings from survey data, the average belief about the risk premium in the economy relates negatively to future excess returns and is smoother than the true risk premium. © The Author 2017. Published by Oxford University Press on behalf of The Review of Economic Studies Limited.
