By Noah Smith – That’s why this 2012 paper (pdf) by Andrei Shleifer and Robin Greenwood is so interesting. They take an extremely simple approach toward measuring people expectations: Just ask people what they think is going to happen! Actually, what they do is to take data from six different surveys of the stock market expectations of individual investors.
When recent returns have been high, people expect the recent “trend” to continue, and buy accordingly. Trend-chasing – and causes of trend-chasing, such as herd behavior – has received a fair amount of attention in the behavioral literature, though perhaps not as much as it should. more> http://tinyurl.com/jvnskpq