Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/302637 
Year of Publication: 
2024
Series/Report no.: 
IZA Discussion Papers No. 17120
Publisher: 
Institute of Labor Economics (IZA), Bonn
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.
Subjects: 
expectations
surveys
higher-order beliefs
asset pricing
JEL: 
G11
G12
G51
D84
C83
Document Type: 
Working Paper

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