
Abstract
We examine the additivity of stock-market expectations over different time intervals. When asked about a ten-year interval, survey respondents expect a stock-price change that is not equal to, but closer to zero than, the sum of their expectations over two shorter time intervals that cover the same ten years. Such sub-additivity is irrational in that it cannot stem from aggregating short-term expectations. Model estimates show that the pattern is consistent with a time perception where shorter time intervals have a proportionally larger weight. We also find that the respondents' degree of additivity is correlated with making larger financial investments.
Item Type: | Paper |
---|---|
Keywords: | expectation formation; time perception; sub-additivity; super-additivity |
Faculties: | Economics > Collaborative Research Center Transregio "Rationality and Competition" |
Subjects: | 300 Social sciences > 330 Economics |
JEL Classification: | D01, D14, D84, D9 |
URN: | urn:nbn:de:bvb:19-epub-93164-9 |
Language: | English |
Item ID: | 93164 |
Date Deposited: | 12. Sep 2022 11:33 |
Last Modified: | 12. Sep 2022 11:33 |