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The influence of short-term subjective expectations on stock price movements

Johannes Schmidt

Financial Markets and Portfolio Management2025https://doi.org/10.1007/s11408-025-00469-6article
AJG 2ABDC B
Weight
0.50

What the paper says

This paper examines the role of short-term subjective expectations in asset pricing by analyzing their explanatory power for stock price movements. I use a sample of the Swiss stock market from 2003 to 2022 to compute aggregate measures of subjective expectations. I find a strong positive relationship between subjective growth expectations and future realized growth. Furthermore, I observe that the forecast errors of subjective growth expectations are predictable, which should not be the case in a world of rational expectations. The proportions of variation in the price-dividend, price-earnings, and price-to-cash flow ratio are estimated using a variance decomposition approach. The results indicate that subjective expectations significantly contribute to these variations.

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https://doi.org/https://doi.org/10.1007/s11408-025-00469-6

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@article{johannes2025,
  title        = {{The influence of short-term subjective expectations on stock price movements}},
  author       = {Johannes Schmidt},
  journal      = {Financial Markets and Portfolio Management},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1007/s11408-025-00469-6},
}

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The influence of short-term subjective expectations on stock price movements

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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