Glaser, Markus () (Sonderforschungsbereich 504) Weber, Martin () (Lehrstuhl für ABWL, Finanzwirtschaft, insb. Bankbetriebslehre)
Abstract
This study offers the unique opportunity to analyze how an unprecedented crisis such as the September 11 tragedy influences expected returns and volatility forecasts of individual investors. Via e-mail, we asked a randomly selected group of individual investors with accounts at a German online broker to answer an internet questionnaire at the beginning of August, 2001. A second e-mail to the investors who have not yet answered, scheduled five weeks later, was postponed due to the terror attacks until September 20, which was exactly the day with the lowest share prices in Germany in the year 2001. Based on the answers to questions concerning stock market predictions, we find that return forecasts of the investors in our sample are significantly higher after September 11. The actual returns from the respective time of response until the end of the year 2001 are overestimated in both groups. The second group of investors states return forecasts that are approximately twice as high as the true realized returns. After the terror attacks, volatility forecasts are higher than before September 11. In two out of four cases, historical volatilities are overestimated. Therefore, investors are not generally overconfident in the way that they underestimate the variance of stock returns. Differences of opinion with regard to return forecasts are lower after the terror attacks whereas differences of opinion concerning volatility forecasts are mainly unaffected. Furthermore, differences of opinion are generally higher with regard to return (point) forecasts when compared to differences of opinion with regard volatility forecasts.
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Publisher Info
Paper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number
03-17.
Length: 33 pages Date of creation: 26 Sep 2003 Date of revision: Handle: RePEc:xrs:sfbmaa:03-17
Note: Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged. Contact details of provider: Postal: D-68131 Mannheim Phone: (49) (0) 621-292-2547 Fax: (49) (0) 621-292-5594 Email: Web page: http://www.sfb504.uni-mannheim.de/ More information through EDIRC
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