A0646
Title: Institutions' return expectations across assets and time
Authors: Markus Ibert - Copenhagen Business School (Denmark) [presenting]
Magnus Dahlquist - Stockholm School of Economics (Sweden)
Abstract: The purpose is to study the equity, Treasury bond, and corporate bond risk premium expectations of asset managers, investment consultants, wealth advisers, public pension funds, and professional forecasters. Subjective risk premia vary one-to-one with objective risk premia that are available in real-time and known to be countercyclical (i.e., high in recessions and low in expansions). Despite their significant countercyclical time-series variation, many subjective risk premia vary more in the cross-section than in the time series, indicating persistent heterogeneity. This heterogeneity in subjective risk premia is tied to heterogeneity in expectations about long-run valuation levels. Overall, the results support rational expectations of asset pricing models that generate countercyclical risk premia and heterogeneous expectations.
