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Measuring Long-Run Expectations that Correlate with Investment Decisions

Author

Listed:
  • Peter Haan
  • Chen Sun
  • Felix Weinhardt
  • Georg Weizsäcker

Abstract

Different methods of eliciting long-run expectations yield data that predict economic choices differently well. We ask members of a wide population sample to make a 10-year investment decision and to forecast stock market returns in one of two formats: they either predict the average of annual growth rates over the next 10 years, or they predict the total, cumulative growth that occurs over the 10-year period. Results show that total 10- year forecasts are more pessimistic than average annual forecasts, but they better predict experimental portfolio choices and real-world stock market participation.

Suggested Citation

  • Peter Haan & Chen Sun & Felix Weinhardt & Georg Weizsäcker, 2025. "Measuring Long-Run Expectations that Correlate with Investment Decisions," Discussion Papers of DIW Berlin 2130, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp2130
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    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D9 - Microeconomics - - Micro-Based Behavioral Economics

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