Expected equity returns and portfolio choice: Evidence from the health and retirement study

Jeff Dominitz*, Charles Manski

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

37 Scopus citations

Abstract

To provide an empirical basis for the study of expectations, we have undertaken survey research measuring in probabilistic terms the beliefs that Americans hold about equity returns in the year ahead. This paper presents new findings on the expected returns reported in the 2004 Health and Retirement Study. We find substantial heterogeneity of reported beliefs, but, strikingly, nearly two-thirds of respondents report no better than a 50-50 chance of a positive nominal return. As in our earlier work, expected returns decline with age and are higher for men than for women. We find here that the probability of holding stocks increases substantially as the perceived chance of a positive return increases. These findings are potentially of considerable importance for portfolio choice.

Original languageEnglish (US)
Pages (from-to)369-379
Number of pages11
JournalJournal of the European Economic Association
Volume5
Issue number2-3
DOIs
StatePublished - Apr 1 2007

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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