A0230
Title: Who is updating stock market expectations in response to market turmoil?
Authors: Alexander Glas - FAU Erlangen-Nuernberg (Germany) [presenting]
Christian Conrad - Heidelberg University (Germany)
Marina da Silva Rapp - Heidelberg University (Germany)
Abstract: The reaction of households' stock market expectations to stock market turmoil is analyzed. Turmoil events are defined as the simultaneous occurrence of a large increase in the VIX and a large drop in the S\&P500. The fact that the survey of consumer expectations is exploited provides information on the date on which respondents submit their questionnaires to conduct an event study. The estimates reveal a significant downward revision of probabilistic stock market expectations in response to turmoil events. However, there is substantial cross-sectional heterogeneity in households' reactions. In particular, the effect is considerably larger for older respondents, high-income households and individuals who recently moved money in their defined contribution plan into less risky investments.
