Beliefs About the Stock Market and Investment Choices: Evidence from a Field Experiment

95 Pages Posted: 26 Mar 2021 Last revised: 11 Apr 2023

See all articles by Christine Laudenbach

Christine Laudenbach

SAFE and Goethe University

Annika Weber

Goethe University Frankfurt; Leibniz Institute for Financial Research SAFE

Rüdiger Weber

WU Vienna; Vienna Graduate School of Finance (VGSF)

Johannes Wohlfart

University of Copenhagen

Multiple version iconThere are 2 versions of this paper

Date Written: April 11, 2023

Abstract

We survey retail investors at an online bank to study how beliefs about the autocorrelation of
aggregate stock returns shape investment decisions measured in administrative account data.
Individuals’ beliefs exhibit substantial heterogeneity and predict trading responses to market
movements. We inform half of our respondents that, historically, the autocorrelation of returns
was close to zero, which persistently changes their beliefs. The treatment significantly shifts
respondents’ equity purchases during the Covid-19 crash months later in the direction implied by
the belief changes caused by the intervention. Our results provide causal evidence on the drivers
of disagreement and trade in asset markets.

Keywords: Expectation Formation, Institutional Investors, Trading, Field Experiment.

JEL Classification: D83, D84, D91, E71, G11, G12, G41, G50.

Suggested Citation

Laudenbach, Christine and Weber, Annika and Weber, Rüdiger and Wohlfart, Johannes, Beliefs About the Stock Market and Investment Choices: Evidence from a Field Experiment (April 11, 2023). Available at SSRN: https://ssrn.com/abstract=3812346 or http://dx.doi.org/10.2139/ssrn.3812346

Christine Laudenbach

SAFE and Goethe University ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt, 60323
Germany

Annika Weber

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Rüdiger Weber

WU Vienna ( email )

Welthandelsplatz 1 1
Wien, 1020
Austria

Vienna Graduate School of Finance (VGSF) ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

Johannes Wohlfart (Contact Author)

University of Copenhagen ( email )

Øster Farimagsgade 5
Building 35
Copenhagen, DK-1353
Denmark

HOME PAGE: http://https://sites.google.com/site/johanneswohlfartecon/home

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