Shocks and Expected Stock Returns

Tuesday 13 May 2025 12:15-13:15,
Elise Ottesen-Jensens hus,
EOJ 276/277.

A Research Seminar in Economics and Finance with Professor Chris Veld from Monash University, Melbourne

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Details about the seminar
Guest

Professor Chris Veld from Monash University, Melbourne Australia

Paper

Shocks and Expected Stock Returns

When and where

Tuesday, May 13 at 12.13–13.15 Room EOJ 276/277 or join on Zoom

Abstract:

We study whether an important shock causes shifts in individuals’ long-term stock market expectations. For this purpose, we use unique survey data of the same representative panel of individuals before, during, and after COVID. We find that raw return expectations are higher during COVID. However, when we correct for the long-term market forecast using the Cyclically Adjusted Price-to-Earnings Ratio (CAPE) of Campbell and Shiller, we find the opposite result: return expectations adjusted for the CAPE-based forecast are lower during COVID compared to the period before COVID, and they quickly recover afterwards. Risk expectations are higher during COVID compared to other periods. These results hold after controlling for recent realized returns and government interventions.