Measuring and Interpreting Expectations of Equity Returns

36 Pages Posted: 9 Jun 2005

See all articles by Jeff Dominitz

Jeff Dominitz

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management; RAND Corporation

Charles F. Manski

Northwestern University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: May 2005

Abstract

We analyze probabilistic expectations of equity returns elicited in the Survey of Economic Expectations in 1999 %uF8182001 and in the Michigan Survey of Consumers in 2002 %uF8182004. Our empirical findings suggest that individuals use interpersonally variable but intrapersonally stable processes to form their expectations. We therefore propose to think of the population as a mixture of expectations types, each forming expectations in a stable but different way. We use our expectations data to learn about the prevalence of several specific types suggested by research in conventional and behavioral finance, but conclude that these types do not adequately explain the diverse expectations held by the population.

Suggested Citation

Dominitz, Jeff and Manski, Charles F., Measuring and Interpreting Expectations of Equity Returns (May 2005). NBER Working Paper No. w11313. Available at SSRN: https://ssrn.com/abstract=721086

Jeff Dominitz

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management ( email )

Pittsburgh, PA 15213-3890
United States

RAND Corporation ( email )

1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
United States

Charles F. Manski (Contact Author)

Northwestern University - Department of Economics ( email )

2003 Sheridan Road
Evanston, IL 60208
United States
847-491-8223 (Phone)
847-491-7001 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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