How Much Do Subjective Growth Expectations Matter for Asset Prices?

129 Pages Posted: 17 Sep 2022 Last revised: 13 Oct 2023

See all articles by Aditya Chaudhry

Aditya Chaudhry

Ohio State University - Fisher College of Business

Date Written: September 3, 2022

Abstract

I find that the causal effect of subjective growth expectations on asset prices is far smaller than standard models suggest. To quantify this causal effect, I construct an asset demand model in which Bayesian investors learn from analysts and other signals. Leveraging holdings, prices, and beliefs data, I find a 1% rise in annual investor growth expectations raises price by 60% to 90% less than in standard models. This small causal effect arises from the limited passthrough of beliefs to asset demand, and is consistent with small price elasticities of demand.

Keywords: Subjective Beliefs, Asset Demand, High-Frequency Identification, Machine Learning

JEL Classification: G12,G02

Suggested Citation

Chaudhry, Aditya, How Much Do Subjective Growth Expectations Matter for Asset Prices? (September 3, 2022). Available at SSRN: https://ssrn.com/abstract=4209688 or http://dx.doi.org/10.2139/ssrn.4209688

Aditya Chaudhry (Contact Author)

Ohio State University - Fisher College of Business ( email )

2100 Neil Ave
Building 249
Columbus, OH 43210
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
1,164
Abstract Views
2,860
Rank
33,864
PlumX Metrics