Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/104690
Authors: 
Drerup, Tilman
Enke, Benjamin
von Gaudecker, Hans-Martin
Year of Publication: 
2014
Series/Report no.: 
IZA Discussion Papers 8535
Abstract: 
While stock market expectations are among the most important primitives of portfolio choice models, their measurement has proved challenging for some respondents. We argue that the magnitude of measurement error in subjective expectations can be used as an indicator of the degree to which economic models of portfolio choice provide an adequate representation of individual decision processes. In order to explore this conjecture empirically, we estimate a semiparametric double index model on a dataset specifically collected for this purpose. Stock market participation reacts strongly to changes in model parameters for respondents at the lower end of the measurement error distribution; these effects are much less pronounced for individuals at the upper end. Our findings indicate that measurement error in subjective expectations provides useful information to uncover heterogeneity in choice behavior.
Subjects: 
measurement error
subjective expectations
stock market participation
JEL: 
C35
C51
G11
Document Type: 
Working Paper

Files in This Item:
File
Size
1.86 MB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.