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

CEBI Working Paper 17/21

99 Pages Posted: 1 Feb 2022 Last revised: 7 Oct 2022

See all articles by Annika Weber

Annika Weber

Goethe University Frankfurt; Leibniz Institute for Financial Research SAFE

Christine Laudenbach

SAFE and Goethe University

Johannes Wohlfart

University of Copenhagen

Rüdiger Weber

WU Vienna; Vienna Graduate School of Finance (VGSF)

Multiple version iconThere are 2 versions of this paper

Date Written: November 23, 2021

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. Among those who initially believe in mean reversion, treated respondents buy significantly less equity during the Covid-19 crash months later. Our results provide causal evidence on the drivers of disagreement and trade in asset markets.

Keywords: Expectation Formation, Retail Investors, Trading, Field Experiment

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

Suggested Citation

Weber, Annika and Laudenbach, Christine and Wohlfart, Johannes and Weber, Rüdiger, Beliefs About the Stock Market and Investment Choices: Evidence from a Field Experiment (November 23, 2021). CEBI Working Paper 17/21, Available at SSRN: https://ssrn.com/abstract=3969783 or http://dx.doi.org/10.2139/ssrn.3969783

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

Christine Laudenbach

SAFE and Goethe University ( email )

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

Johannes Wohlfart (Contact Author)

University of Copenhagen ( email )

Nørregade 10
Copenhagen, København DK-1165
Denmark

Rüdiger Weber

WU Vienna ( email )

Welthandelsplatz 1 1
Wien, 1020
Austria

Vienna Graduate School of Finance (VGSF) ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

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