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

53 Pages Posted: 26 Mar 2021 Last revised: 21 Sep 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

Date Written: September 20, 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 was close to zero, which causes them to update their perceived current autocorrelation and return expectations. The treatment shifts respondents' equity purchases during the Covid-19 crash months later in the direction implied by the intervention. Our results provide causal evidence on the drivers of disagreement and trade in asset markets.

Keywords: Expectation Formation, Individual 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 Survey and a Field Experiment (September 20, 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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