Do survey expectations of stock returns reflect risk-adjustments?
- Motivated by the observation that survey expectations of stock returns are inconsistent with rational return expectations under real-world probabilities, we investigate whether alternative expectations hypotheses entertained in the asset pricing literature are consistent with the survey evidence. We empirically test (1) the notion that survey forecasts constitute rational but risk-neutral forecasts of future returns, and (2) the notion that survey fore- casts are ambiguity averse/robust forecasts of future returns. We find that these alternative hypotheses are also strongly rejected by the data, albeit for different reasons. Hypothesis (1) is rejected because survey return forecasts are not in line with risk-free interest rates and because survey expected excess returns are predictable. Hypothesis (2) is rejected because agents are not al- ways pessimistic about future returns, instead often display overly optimistic return expectations. We speculate as to what kind of expectations theories might be consistent with the available survey evidence.
Author: | Klaus AdamORCiDGND, Dmitry Matveev, Stefan Nagel |
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URN: | urn:nbn:de:hebis:30:3-473476 |
URL: | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3274333 |
Parent Title (English): | Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 600 |
Series (Serial Number): | CFS working paper series (600) |
Publisher: | Center for Financial Studies |
Place of publication: | Frankfurt, M. |
Document Type: | Working Paper |
Language: | English |
Year of Completion: | 2018 |
Year of first Publication: | 2018 |
Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
Release Date: | 2018/11/02 |
Issue: | September 25, 2018 |
Page Number: | 38 |
HeBIS-PPN: | 439736382 |
Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
Sammlungen: | Universitätspublikationen |
Licence (German): | Deutsches Urheberrecht |