Countercyclical Expected Returns

45 Pages Posted: 10 Apr 2020 Last revised: 7 Dec 2022

See all articles by Stig Vinther Møller

Stig Vinther Møller

Aarhus University - CREATES

Thomas Quistgaard Pedersen

Aarhus University - CREATES

Sigurd Steffensen

Danmarks Nationalbank (central bank of Denmark)

Date Written: March 16, 2020


We study how professional economists form expectations of returns on the S&P 500 index using data from the Livingston survey over the 1952-2019 period. We find that professional economists have countercyclical expectations of stock returns consistent with consumption-based model predictions. We find little evidence that professional economists form expectations about returns by extrapolating past trends in returns. However, there is clear evidence that expected returns are less persistent than what is implied by standard asset pricing theory.

Keywords: Survey data, countercyclical expectations, extrapolative expectations

JEL Classification: E44, G12

Suggested Citation

Møller, Stig Vinther and Pedersen, Thomas Quistgaard and Steffensen, Sigurd, Countercyclical Expected Returns (March 16, 2020). Available at SSRN: or

Stig Vinther Møller

Aarhus University - CREATES ( email )

Nordre Ringgade 1
Aarhus, DK-8000

Thomas Quistgaard Pedersen (Contact Author)

Aarhus University - CREATES ( email )

School of Economics and Management
Building 1322, Bartholins Alle 10
DK-8000 Aarhus C

Sigurd Steffensen

Danmarks Nationalbank (central bank of Denmark) ( email )

Havnegade 5
Copenhagen, 1093

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