AFS Annual Meeting 2018

We investigate whether myopic behavior influences respondents’ risk perception of future stock market returns. Using the 2012 wave of the Health and Retirement Study, we find that investors who are myopic (i.e. follow the stock market “very closely” or “somewhat closely”) are significantly more likely to be in a higher subjective probability group that believes the market for blue chip stocks will drop by 20 percent or more next year. In addition, we find that older cohorts and stockholders have a more accurate perception of future stock market returns than do younger cohorts and non-stockholders. Financial planning implications are provided.

Author(s): Yi Liu , Michael Guillemette