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Five Facts About Beliefs and Portfolios

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  • Maggiori, Matteo
  • Ströbel, Johannes
  • Giglio, Stefano
  • Utkus, Stephen P.

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 & Ströbel, Johannes & Giglio, Stefano & Utkus, Stephen P., 2019. "Five Facts About Beliefs and Portfolios," CEPR Discussion Papers 13657, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:13657
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    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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