Crash Beliefs from Investor Surveys

34 Pages Posted: 21 Mar 2016  

William N. Goetzmann

Yale School of Management - International Center for Finance; National Bureau of Economic Research (NBER)

Dasol Kim

Office of Financial Research, US Department of the Treasury

Robert J. Shiller

Yale University - Cowles Foundation; National Bureau of Economic Research (NBER); Yale University - International Center for Finance

Multiple version iconThere are 2 versions of this paper

Date Written: March 19, 2016

Abstract

Historical data suggest that the base rate for a severe, single-day stock market crash is relatively low. Surveys of individual and institutional investors, conducted regularly over a 26 year period in the United States, show that they assess the probability to be much higher. We examine the factors that influence investor responses and test the role of media influence. We find evidence consistent with an availability bias. Recent market declines and adverse market events made salient by the financial press are associated with higher subjective crash probabilities. Non-market-related, rare disasters are also associated with higher subjective crash probabilities.

Keywords: Crash Beliefs, Availability Bias, Investor Surveys

JEL Classification: G00, G11, G23, E03, G02

Suggested Citation

Goetzmann, William N. and Kim, Dasol and Shiller, Robert J., Crash Beliefs from Investor Surveys (March 19, 2016). Available at SSRN: https://ssrn.com/abstract=2750638 or http://dx.doi.org/10.2139/ssrn.2750638

William N. Goetzmann

Yale School of Management - International Center for Finance ( email )

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HOME PAGE: http://viking.som.yale.edu

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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Dasol Kim (Contact Author)

Office of Financial Research, US Department of the Treasury ( email )

717 14th Street, NW
Washington, DC 20220
United States

Robert J. Shiller

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
203-432-3708 (Phone)

Yale University - International Center for Finance ( email )

Box 208200
New Haven, CT 06520
United States
203-432-3708 (Phone)
203-432-6167 (Fax)

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States
203-432-3708 (Phone)
203-432-6167 (Fax)

HOME PAGE: http://www.econ.yale.edu/~shiller/

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