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Socioeconomic Status and Macroeconomic Expectations

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  • Sreyoshi Das
  • Camelia M Kuhnen
  • Stefan Nagel

Abstract

We show that individuals’ macroeconomic expectations are influenced by their socioeconomic status (SES). People with higher income or higher education are more optimistic about future macroeconomic developments, including business conditions, the national unemployment rate, and stock market returns. The spread in beliefs between high- and low-SES individuals diminishes significantly during recessions. A comparison with professional forecasters and historical data reveals that the beliefs wedge reflects excessive pessimism on the part of low-SES individuals. SES-driven expectations help explain why higher-SES individuals are more inclined to invest in the stock market and more likely to consider purchasing homes, durable goods, or cars.Received November 13, 2017; editorial decision February 12, 2019 by Editor Wei Jiang. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Suggested Citation

  • Sreyoshi Das & Camelia M Kuhnen & Stefan Nagel, 2020. "Socioeconomic Status and Macroeconomic Expectations," The Review of Financial Studies, Society for Financial Studies, vol. 33(1), pages 395-432.
    • Handle: RePEc:oup:rfinst:v:33:y:2020:i:1:p:395-432.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhz041
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    More about this item

    JEL classification:

    • E03 - Macroeconomics and Monetary Economics - - General - - - Behavioral Macroeconomics
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G4 - Financial Economics - - Behavioral Finance
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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