Table 10:
Extreme Beliefs and Planning Horizons
| Panel A Dep. Var: | The EA Score and Beliefs | |||
|---|---|---|---|---|
| Deviation | Prob=0 | Prob=0.5 | Prob=1 | |
| [1] | [2] | [3] | [4] | |
| Stock Market Goes Up | ||||
| EA Score | −0.567*** (0.162) | −0.006*** (0.002) | −0.003 (0.003) | −0.002 (0.001) |
| Obs. | 35842 | 35842 | 35842 | 35842 |
| R2 | 0.097 | 0.062 | 0.030 | 0.048 |
| Mean outcome | 28.31 | 0.05 | 0.30 | 0.04 |
| Depression | ||||
| EA Score | −0.550*** (0.138) | −0.005** (0.002) | −0.003 (0.003) | −0.008*** (0.002) |
| Obs. | 35912 | 35912 | 35912 | 35912 |
| R2 | 0.088 | 0.047 | 0.037 | 0.072 |
| Mean outcome | 24.94 | 0.07 | 0.26 | 0.06 |
| Double Digit Inflation | ||||
| EA Score | −1.054*** (0.193) | −0.004** (0.002) | −0.005 (0.004) | −0.011*** (0.002) |
| Obs. | 22604 | 22604 | 22604 | 22604 |
| R2 | 0.080 | 0.057 | 0.044 | 0.072 |
| Mean outcome | 26.10 | 0.06 | 0.34 | 0.07 |
| Panel B Dep. Var: | The EA Score and Planning Horizons | |||
| PH≥ 1 Yr. | PH≥ Few Yrs. | PH≥ 5–10 Yrs. | PH> 10 | |
| [1] | [2] | [3] | [4] | |
| EA Score | 0.008*** (0.003) | 0.011*** (0.004) | 0.013*** (0.004) | 0.004 (0.003) |
| Obs. | 27752 | 27752 | 27752 | 27752 |
| R2 | 0.072 | 0.081 | 0.077 | 0.045 |
| Mean outcome | 0.87 | 0.75 | 0.45 | 0.11 |
| Standard Controls | X | X | X | X |
| Principal Comp. | X | X | X | X |
| Full Educ. Controls | X | X | X | X |
Notes: Panel A of this table presents estimates from regressions of beliefs about probabilities of three macroeconomic events on the EA score and various controls. Separate estimates are given for three distinct macroeconomic events: an increase in the stock market over the next year, a major depression in the next 10 years, and double-digit inflation in the next 10 years. In Column [1] the dependent variable is the absolute value of the deviation of the respondent’s belief from an “objective” probability (as described in Section 5.5). The outcome variables in Columns [2], [3] and [4] are indicators for providing subjective probabilities of 0, 0.5 and 1, respectively. Panel B presents estimates from regressions of indicator variables for the length of a respondent’s financial planning horizon on the EA score and various controls. In Column [1] the dependent variable is an indicator for reporting a planning horizon greater than or equal to one year. In Columns [2], [3] and [4], the dependent variables are indicators for horizons of “greater than or equal to a few years;” “greater than or equal to 5–10 years;” and “greater than 10 years,” respectively. Significance stars ***, **, and * indicate statistical significance at the 0.01, 0.05, and 0.10 levels, respectively. Standard errors are clustered at the family level.