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Expectations of Returns and Expected Returns

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  • Greenwood, Robin Marc
  • Shleifer, Andrei

Abstract

We analyze time series of investor expectations of future stock market returns from six data sources between 1963 and 2011. The six measures of expectations are highly positively correlated with each other, as well as with past stock returns and with the level of the stock market. However, investor expectations are strongly negatively correlated with model-based expected returns. The evidence is not consistent with rational expectations representative investor models of returns.

Suggested Citation

  • Greenwood, Robin Marc & Shleifer, Andrei, 2014. "Expectations of Returns and Expected Returns," Scholarly Articles 11880390, Harvard University Department of Economics.
    • Handle: RePEc:hrv:faseco:11880390
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    More about this item

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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