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Expectations Uncertainty and Household Economic Behavior

Author

Listed:
  • Ben-David, Itzhak

    (Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER))

  • Fermand, Elyas

    (University of North Carolina (UNC) at Chapel Hill - Finance Area)

  • Kuhnen, Camelia M.

    (University of North Carolina Kenan-Flagler Business School & NBER)

  • Li, Geng

    (Federal Reserve Board)

Abstract

We show that there exists significant heterogeneity across US households in how uncertain they are in their expectations regarding personal and macroeconomic outcomes, and that uncertainty in expectations predicts households' choices. Individuals with lower income or education, more precarious finances, and living in counties with higher unemployment are more uncertain in their expectations regarding own-income growth, inflation, and national home price changes. People with more uncertain expectations, even accounting for their socioeconomic characteristics, exhibit more precaution in their consumption, credit, and investment behaviors.

Suggested Citation

  • Ben-David, Itzhak & Fermand, Elyas & Kuhnen, Camelia M. & Li, Geng, 2018. "Expectations Uncertainty and Household Economic Behavior," Working Paper Series 2018-25, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    • Handle: RePEc:ecl:ohidic:2018-25
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    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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