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Expectations of Returns and Expected Returns

  • Robin Greenwood
  • Andrei Shleifer

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.

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File URL: http://scholar.harvard.edu/shleifer/node/102501
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Paper provided by Harvard University OpenScholar in its series Working Paper with number 102501.

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  14. Jeffrey A. Frankel and Kenneth A. Froot., 1986. "Explaining the Demand for Dollars: International Rates of Return and the Expectations of Chartists and Fundamentalists," Economics Working Papers 8603, University of California at Berkeley.
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  30. John H. Cochrane, 2011. "Presidential Address: Discount Rates," Journal of Finance, American Finance Association, vol. 66(4), pages 1047-1108, 08.
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