Crash Beliefs from Investor Surveys
34 Pages Posted: 21 Mar 2016
There are 2 versions of this paper
Crash Beliefs from Investor Surveys
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: Suggested Citation
William N. Goetzmann
Yale School of Management - International Center for Finance ( email )
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Yale University - International Center for Finance ( email )
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Yale University - Cowles Foundation ( email )
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