Beliefs About the Stock Market and Investment Choices: Evidence from a Field Experiment (Review of Financial Studies, forthcoming)
(joint with Christine Laudenbach, Annika Weber and Johannes Wohlfart)
Abstract: We survey retail investors at an online bank to study how beliefs about the autocorrelation of aggregate stock returns shape investment decisions measured in administrative account data. Individuals’ beliefs exhibit substantial heterogeneity and predict trading responses to market movements. We inform half of our respondents that, historically, the autocorrelation of returns was close to zero, which persistently changes their beliefs. The treatment significantly shifts respondents’ equity purchases during the Covid-19 crash months later in the direction implied by the belief changes caused by the intervention. Our results provide causal evidence on the drivers of disagreement and trade in asset markets. markets.
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