Five Facts About Beliefs and Portfolios

72 Pages Posted: 9 Apr 2019 Last revised: 2 Mar 2020

See all articles by Matteo Maggiori

Matteo Maggiori

Harvard University; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Johannes Stroebel

New York University (NYU) - Leonard N. Stern School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Stefano Giglio

Yale School of Management; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Stephen P. Utkus

University of Pennsylvania; Center for Financial Markets and Policy, Georgetown University

Multiple version iconThere are 4 versions of this paper

Date Written: April 2019

Abstract

We administer a newly-designed survey to a large panel of wealthy retail investors. The survey elicits beliefs that are important for macroeconomics and finance, and matches respondents with administrative data on their portfolio composition, their log-in behavior, and their trading activity. We establish five facts in this data: (1) Beliefs are reflected in portfolio allocations. The sensitivity of portfolios to beliefs is small on average, but varies significantly with investor wealth, attention, trading frequency, and confidence. (2) Belief changes do not predict when investors trade, but conditional on trading, they affect both the direction and the magnitude of trades. (3) Beliefs are mostly characterized by large and persistent individual heterogeneity; demographic characteristics explain only a small part of why some individuals are optimistic and some are pessimistic. (4) Expected cash flow growth and expected returns are positively related, both within and across investors. (5) Expected returns and the subjective probability of rare disasters are negatively related, both within and across investors. These five facts provide useful guidance for the design of macro-finance models.

Suggested Citation

Maggiori, Matteo and Stroebel, Johannes and Giglio, Stefano and Utkus, Stephen P., Five Facts About Beliefs and Portfolios (April 2019). CEPR Discussion Paper No. DP13657, Available at SSRN: https://ssrn.com/abstract=3368155

Matteo Maggiori

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
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National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

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Johannes Stroebel

New York University (NYU) - Leonard N. Stern School of Business ( email )

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National Bureau of Economic Research (NBER) ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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Stefano Giglio (Contact Author)

Yale School of Management ( email )

135 Prospect Street
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New Haven, CT 06520-8200
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National Bureau of Economic Research (NBER) ( email )

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Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Stephen P. Utkus

University of Pennsylvania ( email )

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Philadelphia, PA 19104-6365
United States

Center for Financial Markets and Policy, Georgetown University ( email )

Washington, DC 20057
United States

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