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

Arbeitspapier

We survey retail investors at an online bank to study beliefs about the autocorrelation of aggregate stock returns, and how these beliefs shape investment decisions measured in administrative account data. Individuals' beliefs exhibit substantial heterogeneity and predict trading responses to market movements. We inform a random half of our respondents that historically the autocorrelation of aggregate returns was close to zero, which persistently changes their beliefs. Among those initially believing in mean reversion, treated respondents buy significantly less equity during the COVID-19 crash four months later. Our results highlight how heterogeneity in subjective models causally drives trade in asset markets.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CEBI Working Paper Series ; No. 17/21

Classification and Topics

• Classification: Wirtschaft ; Household Saving; Personal Finance ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness ; Expectations; Speculations ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡ ; Macro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy‡
• Subject: Expectation Formation ; Information ; Updating ; Retail Investors ; Trading

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Weber, Annika ; Laudenbach, Christine ; Wohlfart, Johannes
• Event: Veröffentlichung
• (who): University of Copenhagen, Department of Economics, Center for Economic Behavior and Inequality (CEBI)
• (where): Copenhagen
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/258960
• Last update: 10.03.2025, 11:43 AM CET