Arbeitspapier

Measurement Error in Subjective Expectations and the Empirical Content of Economic Models

While stock market expectations are among the most important primitives of portfolio choice models, their measurement has proved challenging for some respondents. We argue that the magnitude of measurement error in subjective expectations can be used as an indicator of the degree to which economic models of portfolio choice provide an adequate representation of individual decision processes. In order to explore this conjecture empirically, we estimate a semiparametric double index model on a dataset specifically collected for this purpose. Stock market participation reacts strongly to changes in model parameters for respondents at the lower end of the measurement error distribution; these effects are much less pronounced for individuals at the upper end. Our findings indicate that measurement error in subjective expectations provides useful information to uncover heterogeneity in choice behavior.

Sprache
Englisch

Erschienen in
Series: IZA Discussion Papers ; No. 8535

Klassifikation
Wirtschaft
Multiple or Simultaneous Equation Models: Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
Model Construction and Estimation
Portfolio Choice; Investment Decisions
Thema
measurement error
subjective expectations
stock market participation

Ereignis
Geistige Schöpfung
(wer)
Drerup, Tilman
Enke, Benjamin
von Gaudecker, Hans-Martin
Ereignis
Veröffentlichung
(wer)
Institute for the Study of Labor (IZA)
(wo)
Bonn
(wann)
2014

Handle
Letzte Aktualisierung
10.03.2025, 11:43 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Drerup, Tilman
  • Enke, Benjamin
  • von Gaudecker, Hans-Martin
  • Institute for the Study of Labor (IZA)

Entstanden

  • 2014

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