Universität Bonn

Department of Economics

Xiao Yin - University College London

"Higher-Order Beliefs and Risky Asset Holdings"

Abstract

We combine a customized survey and randomized controlled trial (RCT) to study the effect of higher-order beliefs on U.S. retail investors’ portfolio allocations. We find that investors’ higher-order beliefs about stock market returns are correlated with but distinct from their first-order beliefs. Furthermore, the differences between the two vary systematically according to investor characteristics. We use information treatments in the RCT to create exogenous differential variations in first- and higher-order beliefs. We find that an exogenous increase in first-order beliefs increases the portfolio share allocated to the stock market (risky assets), while an exogenous increase in higher-order beliefs reduces it.

Additional information:

  • Speaker: Xiao Yin
  • Time: Wednesday, 27.11.2024, 14:45 - 16:00
  • Location: Faculty Lounge, Room 0.036
  • Further links:
  • Organizer: Finance Group
  • Contact: