Dynamics and Heterogeneity of Subjective Stock Market Expectations

50 Pages Posted: 15 Jun 2019

See all articles by Florian Heiss

Florian Heiss

Heinrich Heine University Dusseldorf - Department of Economics; National Bureau of Economic Research (NBER)

Michael Hurd

RAND Corporation - Santa Monica CA Offices

Maarten van Rooij

De Nederlandsche Bank; Netspar

Tobias Rossmann

Ludwig Maximilian University of Munich (LMU)

Joachim K. Winter

Ludwig Maximilian University of Munich (LMU); CESifo (Center for Economic Studies and Ifo Institute); Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA); Deutsche Bundesbank - Research Department

Date Written: June 11, 2019

Abstract

Between 2004 and 2016, we elicited individuals’ subjective expectations of stock market returns in a Dutch internet panel at bi-annual intervals. In this paper, we develop a panel data model with a finite mixture of expectation types who differ in how they use past stock market returns to form current stock market expectations. The model allows. For rounding in the probabilistic responses and for observed and unobserved heterogeneity at several levels. We estimate the type distribution in the population and find evidence for considerable heterogeneity in expectation types and meaningful variation over time, in particular during the financial crisis of 2008/09.

Keywords: expectations, stock markets, financial crisis, mixture models, surveys

JEL Classification: D12, D84, G11

Suggested Citation

Heiss, Florian and Hurd, Michael and van Rooij, Maarten and Rossmann, Tobias and Winter, Joachim K., Dynamics and Heterogeneity of Subjective Stock Market Expectations (June 11, 2019). De Nederlandsche Bank Working Paper No. 640 (2019). Available at SSRN: https://ssrn.com/abstract=3404127 or http://dx.doi.org/10.2139/ssrn.3404127

Florian Heiss

Heinrich Heine University Dusseldorf - Department of Economics ( email )

Duesseldorf
Germany

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Michael Hurd

RAND Corporation - Santa Monica CA Offices ( email )

P.O. Box 2138
1776 Main Street
Santa Monica, CA 90407-2138
United States

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Tobias Rossmann

Ludwig Maximilian University of Munich (LMU) ( email )

Geschwister-Scholl-Platz 1
Munich, Bavaria 80539
Germany

Joachim K. Winter

Ludwig Maximilian University of Munich (LMU) ( email )

Geschwister-Scholl-Platz 1
Munich, Bavaria 80539
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Max Planck Society for the Advancement of the Sciences - Munich Center for the Economics of Aging (MEA) ( email )

Amalienstrasse 33
Munich, 80799
Germany

Deutsche Bundesbank - Research Department ( email )

PO Box 10 06 02
D60006 Frankfurt
Germany

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