Annual Review of Financial Economics· 2026Q1· Review
Investor Beliefs and Expectation Formation
- 1citations
- Q1SCImago
- 2026year
Short summary
Investor expectations show persistent heterogeneity, with muted sensitivity of financial decisions to belief changes, according to a review of survey data literature.
AI-generated from the title and abstract; the full text is not read.
Key points
- Investor expectations are characterized by significant and persistent differences across individuals.
- Financial decisions exhibit a systematic but limited response to shifts in investor beliefs.
- A new analysis examines investor reactions to the April 2025 tariff announcement.
- Future research directions include improving belief measurement and understanding determinants and policy implications.
AI-generated from the title and abstract; the full text is not read.
Abstract
This article reviews the literature that uses survey data to study expectation formation among investors. We begin by outlining methods for eliciting investor beliefs and summarizing key empirical patterns documented in recent work. Highlighting the persistent cross-sectional heterogeneity in expectations, we then review evidence on the determinants of beliefs, including a new analysis of belief reactions to the tariff announcement in April 2025. Next, we examine how expectations shape financial decision-making, emphasizing the systematic but muted sensitivity of outcomes to belief changes. We conclude by pointing to promising directions for future research on belief measurement, the determinants of expectations, and their implications for policy makers.
The authors' abstract, as published at the source. Annual Review of Financial Economics, 2026 · DOI ↗
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Field: Finance
FinanceEconomics, Econometrics and Finance