Stop Worrying About The Stock Market Crashing!
This paper utilizes data on subjective probabilities to study the impact of the stock market crash of 2008 on households’ expectations about the returns on the stock market index. Relief and reform measures enacted by the administration of President Franklin D. Roosevelt (1882-1945) helped lessen the worst effects of the Great Depression; however, the U.S. economy would not fully turn around until after 1939, when World War II (1939-45) revitalized American industry.
Globally, the 2014 slower economic growth in Europe and China took capacity planners and market makers by surprise; the developed world’s drive to decrease carbon emissions is finally having an impact on the oil market through greater energy efficiency.
Using survey data on households’ subjective probability beliefs about the one-year-ahead return on the Dow Jones stock market index, we estimated the effect of the stock market crash on the population average of expected returns, the population average of the uncertainty about returns (subjective standard deviation) and heterogeneity in expected returns.
The coefficients on the other right-hand side variables indicate that women are significantly more pessimistic and more uncertain about stock returns; minorities are substantially more uncertain; older people are less optimistic and less uncertain; more educated people are less uncertain; and smarter people are more optimistic and less uncertain.
Like other HRS subjective probability questions, many answers to the HRS stock market questions are heaped on 50” ( Hurd and McGarry, 1995 ) and, unlike most other probability questions, a substantial number of people fail to answer the stock expectation questions at all.