Crash Beliefs from Investor Surveys

58 Pages Posted: 11 Apr 2016 Last revised: 6 Jul 2018

See all articles by William N. Goetzmann

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: April 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 factors influencing investor responses and test the role of media influence, finding evidence consistent with an availability bias. Adverse market events made salient by financial press are associated with higher subjective crash probabilities. Exogenous shocks related to earthquakes are also associated with higher probabilities. Finally, subjective crash probabilities are negatively associated with mutual fund flows.

Suggested Citation

Goetzmann, William N. and Kim, Dasol and Shiller, Robert J., Crash Beliefs from Investor Surveys (April 2016). NBER Working Paper No. w22143. Available at SSRN: https://ssrn.com/abstract=2762058

William N. Goetzmann (Contact Author)

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)

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Dasol Kim

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

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

Robert J. Shiller

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/

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)

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