Paper title: Hidden Investment Beliefs
Joni Kokkonen joint work with  Markku Kaustia and Vesa Puttonen (Aalto University)

Abstract:
We develop new methods for calibrating subjective expectations regarding the return generating process (RGP) of financial assets. Using finance professionals’ expectations of average and extreme returns, volatilities, and probabilities of stocks beating bonds, we investigate the beliefs implied by these expectations of other key aspects of the RGP, namely stock-bond correlation, stock mean-reversion, and tails of the return distribution. Most subjects’ implicitly assumed beliefs are far beyond plausible, and tend to be driven by a high confidence of stocks outperforming bonds. The results are similar across a range of market conditions and subject expertise, from financial advisers to CIOs.

The public research seminars of the Department of Economics and Finance (DEF) at Tallinn University of Technology  usually take place on the second and fourth Wednesdays of the month in online format, unless announced otherwise. The seminar will last one hour, presentation will last approximately 45 minutes followed by 15 minutes of discussion. The seminars are held in English. The DEF seminar series is organised in collaboration with the project ’’Individual Behaviour and Economic  Performance: Methodological  Challenges and Institutional Context’’ (IBEP), which has received funding from the European Union Horizon 2020 Research and Innovation programme under Grant Agreement No 952574. Questions about the seminar can be sent to the IBEP seminar coordinator Kadri Männasoo, kadri.mannasoo@taltech.ee .