Institutions' Return Expectations across Assets and Time

38 Pages Posted: 17 Jun 2024

See all articles by Magnus Dahlquist

Magnus Dahlquist

Stockholm School of Economics; Swedish House of Finance

Markus Ibert

Copenhagen Business School - Department of Finance; Swedish House of Finance

Date Written: June 08, 2024

Abstract

We study the equity, Treasury bond, and corporate bond risk premium expectations of asset managers, investment consultants, wealth advisers, public pension funds, and professional forecasters. Subjective risk premia vary one-to-one with objective risk premia that are available in real time and known to be countercyclical (i.e., high in recessions and low in expansions). Despite their significant countercyclical time-series variation, many subjective risk premia vary more in the cross-section than in the time series, indicating persistent heterogeneity. We tie this heterogeneity in subjective risk premia to heterogeneity in expectations about long-run valuation levels. Overall, the results support rational expectations asset pricing models that generate countercyclical risk premia and heterogeneous expectations.

Keywords: Beliefs, expectations formation, institutional investors G11, G12, H23

Suggested Citation

Dahlquist, Magnus and Ibert, Markus, Institutions' Return Expectations across Assets and Time (June 08, 2024). Available at SSRN: https://ssrn.com/abstract=4862610 or http://dx.doi.org/10.2139/ssrn.4862610

Magnus Dahlquist

Stockholm School of Economics ( email )

Drottninggatan 98
Stockholm, SE-111 60
Sweden

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

Markus Ibert (Contact Author)

Copenhagen Business School - Department of Finance ( email )

Solbjerg Plads 3, SOL/A4.17
Copenhagen, Frederiksberg 2000

Swedish House of Finance ( email )

Drottninggatan 98
Stockholm, 11160
Sweden

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