Work

Personal Experiences and Expectations about Aggregate Outcomes

Year: 2019

Type: article

Abstract: ABSTRACT Using novel survey data, we document that individuals extrapolate from recent personal experiences when forming expectations about aggregate economic outcomes. Recent locally experienced house price movements affect expectations about future U.S. house price changes and higher experienced house price volatility causes respondents to report a wider distribution over expected U.S. house price movements. When we exploit within‐individual variation in employment status, we find that individuals who personally experience unemployment become more pessimistic about future nationwide unemployment. The extent of extrapolation is unrelated to how informative personal experiences are, is inconsistent with risk adjustment, and is more pronounced for less sophisticated individuals.

Source: The Journal of Finance

DOI: 10.1111/jofi.12819

Authors: THERESA KUCHLER, BASIT ZAFAR

Institutions: New York University, Federal Reserve, National University of Singapore, Federal Reserve Bank of New York, Arizona State University, Ludwig-Maximilians-Universität München, London School of Economics and Political Science

Language: English

Topic: Decision-Making and Behavioral Economics

Subfield: General Decision Sciences

Field: Decision Sciences

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W3023537665

FWCI: 28.05

Cites: 90

Cited by: 401

Related to: 10