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Measuring Long-Run Expectations that Correlate with Investment Decisions

Author

Listed:
  • Peter Haan

    (FU Berlin, DIW Berlin, Berlin School of Economics)

  • Chen Sun

    (HU Berlin)

  • Georg Weizsäcker

    (HU Berlin)

  • Felix Weinhardt

    (European University Viadrina)

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 & Georg Weizsäcker & Felix Weinhardt, 2025. "Measuring Long-Run Expectations that Correlate with Investment Decisions," Rationality and Competition Discussion Paper Series 539, CRC TRR 190 Rationality and Competition.
    • Handle: RePEc:rco:dpaper:539
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    References listed on IDEAS

    as
    1. John Ameriks & Gábor Kézdi & Minjoon Lee & Matthew D. Shapiro, 2020. "Heterogeneity in Expectations, Risk Tolerance, and Household Stock Shares: The Attenuation Puzzle," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 38(3), pages 633-646, July.
    2. Ang, Andrew & Bekaert, Geert & Wei, Min, 2007. "Do macro variables, asset markets, or surveys forecast inflation better?," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1163-1212, May.
    3. Michael P. Clements, 2015. "Are Professional Macroeconomic Forecasters Able To Do Better Than Forecasting Trends?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(2-3), pages 349-382, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

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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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