Return Expectations in the Aggregate Stock Market
Abstract
I devise a measure of aggregate stock market expectations which combines evidence of age-based heterogeneity in return extrapolation, with data on demographics, stock market participation, and prevalence of direct investing over delegated portfolio management. In the sample period 1961-2013, a one percentage point rise in aggregate expectations of future stock returns is followed by a 3 percentage point decline in subsequent yearly excess returns. A simple measure of bias in expectations, which captures procyclical aggregate optimism, has an out-of-sample R2 of 17%.
Degree
Ph.D.
Advisors
Gulen, Purdue University.
Subject Area
Finance
Off-Campus Purdue Users:
To access this dissertation, please log in to our
proxy server.