scholarly journals Variable Rare Disasters: An Exactly Solved Framework for Ten Puzzles in Macro-Finance

2007 ◽  
Author(s):  
Xavier Gabaix
Keyword(s):  
Rare Disasters ◽  
Macro Finance

scholarly journals Five Facts about Beliefs and Portfolios

2021 ◽  
Vol 111 (5) ◽  
pp. 1481-1522
Author(s):  
Stefano Giglio ◽  
Matteo Maggiori ◽  
Johannes Stroebel ◽  
Stephen Utkus
Keyword(s):  
Demographic Characteristics ◽  
Individual Heterogeneity ◽  
Expected Returns ◽  
Trading Frequency ◽  
Portfolio Composition ◽  
Rare Disasters ◽  
Retail Investors ◽  
Large Panel ◽  
Macro Finance ◽  
Belief Changes

We study a newly designed survey administered 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 trading activity, and their login behavior. We establish five facts inthese data. (i) 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. (ii) Belief changes do not predict when investors trade, but conditional on trading, they affect both the direction and the magnitude of trades. (iii) Beliefs are mostly characterized by large and persistent individual heterogeneity. Demographic characteristics explain only asmall part of why some individuals are optimistic and some are pessimistic. (iv) Expected cash flow growth and expected returns are positively related, both within and across investors. (v) 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. (JEL D83, E23, G11, G12, G41, G51)

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