Understanding the Formation of Consumers' Stock Market Expectations

Chin, A. and Bruine de Bruin, W. Understanding the formation of consumers' stock market expectations. Journal of Consumer Affairs, 2016

11 Pages Posted: 2 Jul 2016

See all articles by Alycia Chin

Alycia Chin

Public Company Accounting Oversight Board

Wändi Bruine de Bruin

Carnegie Mellon University

Date Written: 2016

Abstract

To understand consumers' investment decisions, national surveys such as the Health and Retirement Study elicit consumers' expectations about stock market movements. Analyses of stock market expectations show substantial heterogeneity between consumers. It is commonly speculated that this heterogeneity reflects variations in the beliefs underlying consumers' stock market expectations, that is, their “mental models.” In an online survey of American adults, we find that consumers think about different economic and political issues when generating stock market expectations for the next year. Regardless of the specific issues on which consumers focused, however, their assessments of the issues seemed to reflect a single underlying perception of changes in economic conditions. Regression analyses show that variation in stock market expectations is related to consumers' overall assessments of economic developments. We discuss the implications of these results for economic surveys and investment communications.

Suggested Citation

Chin, Alycia and Bruine de Bruin, Wändi, Understanding the Formation of Consumers' Stock Market Expectations (2016). Chin, A. and Bruine de Bruin, W. Understanding the formation of consumers' stock market expectations. Journal of Consumer Affairs, 2016, Available at SSRN: https://ssrn.com/abstract=2803189

Alycia Chin (Contact Author)

Public Company Accounting Oversight Board ( email )

1666 K Street, NW
Washington, DC 20006-2
United States

Wändi Bruine de Bruin

Carnegie Mellon University ( email )

Pittsburgh, PA 15213-3890
United States

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