Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/282029 
Year of Publication: 
2022
Series/Report no.: 
Discussion Paper No. 337
Publisher: 
Ludwig-Maximilians-Universität München und Humboldt-Universität zu Berlin, Collaborative Research Center Transregio 190 - Rationality and Competition, München und Berlin
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.
Subjects: 
expectation formation
time perception
sub-additivity
super-additivity
JEL: 
D01
D14
D84
D09
Document Type: 
Working Paper

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