Socioeconomic Status and Macroeconomic Expectations

Das, Sreyoshi; Kuhnen, Camelia M.; Nagel, Stefan

doi:10.2139/ssrn.3009941

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Socioeconomic Status and Macroeconomic Expectations

Review of Financial Studies, forthcoming

62 Pages Posted: 31 Jul 2017 Last revised: 14 Feb 2019

See all articles by Sreyoshi Das

Sreyoshi Das

University of Michigan at Ann Arbor - Department of Economics

Camelia M. Kuhnen

University of North Carolina (UNC) at Chapel Hill - Finance Area

Stefan Nagel

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research; CESifo (Center for Economic Studies and Ifo Institute)

There are 2 versions of this paper

Date Written: November 13, 2017

Abstract

We show that individuals' macroeconomic expectations are influenced by their socioeconomic status (SES). People with higher income or higher education are more optimistic about future macroeconomic developments, including business conditions, the national unemployment rate, and stock market returns. The spread in beliefs between high- and low-SES individuals diminishes significantly during recessions. A comparison with professional forecasters and historical data reveals that the beliefs wedge reflects excessive pessimism on the part of low-SES individuals. SES-driven expectations help explain why higher-SES individuals are more inclined to invest in the stock market and more likely to consider purchasing homes, durable goods, or cars.

Keywords: expectations, investments, socioeconomic status

JEL Classification: D14, D83, D84, G02, G11

Suggested Citation: Suggested Citation

Das, Sreyoshi and Kuhnen, Camelia M. and Nagel, Stefan, Socioeconomic Status and Macroeconomic Expectations (November 13, 2017). Review of Financial Studies, forthcoming, Available at SSRN: https://ssrn.com/abstract=3009941 or http://dx.doi.org/10.2139/ssrn.3009941