A new study by Peter Haan, Chen Sun, Felix Weinhardt, and Georg Weizsäcker provides insights that can improve measurement of economic beliefs: how should we ask people about their long-term economic expectations? The research has a surprising findings about what type of forecast predicts investment decisions best.
The researchers first observe that forecasts about the total change in the stock market over ten years are more pessimistic than forecasts about the average annual growth. Next, however, they also observe that these more pessimistic forecasts predict investment choice far better. In regressions with normalized variables, the coefficients are about twice as large for the total-growth prediction than for the average-growth prediction.
The study uses a large online survey experiment with over 3,000 people from the U.S. Participants were asked to make a fictional 10-year investment decision. To measure their expectations, they were randomly divided into two groups, each asked a different question. One group was asked for their forecast using the "average annual growth" method. The other group was asked for the "total cumulative growth" over the same period.
The observation that predictions of "total cumulative growth" correlate better with real-world stock market participation holds a lesson for economists and policymakers: the accuracy of a forecast does not necessarily mean that it is the most economically relevant.
This paper’s methodological approach provides a clear causal link between how a question is asked and the predictive power of the answer, due to the use of a large-scale randomized experiment that isolates the impact of the question format.
The paper carries lessons for anyone who needs to measure long-term expectations. For issues like retirement savings decisions or long-run effects of economic policy, the results highlight that the way we frame questions about the long-run future affects how we understand and predict human economic behavior.
About the authors
Peter Haan
Head of department of Public Economics at DIW Berlin and Professor of Public Economics at Freie Universität Berlin. Ph.D in Economics. Studies in Economics and Political Sciences at Albert-Ludwigs-University Freiburg, Humboldt-University Berlin and University of Toronto Visiting Fellow at Paris School of Economics, Institute for Fiscal Studies und UCL London. Recent publications in Journal of Econometrics, Journal of Public Economics, Economic Journal, Journal of Health Economics and Econometrics Journal.
Chen Sun
Holds a PhD in Economics from Tilburg University, worked as a postdoctoral researcher at Humboldt Universität zu Berlin from 2018 to 2025 and is now Assistant Professor at the Shanghai Institute for Mathematics and Interdisciplinary Sciences. His research leis in behavioral and experimental economics, in particular in topics of intertemporal choices and belief formation.
Felix Weinhardt
Applied microeconomist interested in causes and consequences of social and spatial inequality. Consequently, Felix' research lies at the crossroads of Public Economics, Labour Economics, Economics of Education and Urban Economics. A secondary interest is GIS and Environmental Economics. His work has been published/got accepted for publication by the Review of Economic Studies, the Journal of the European Economic Association, the Journal of Labor Economics, the Economic Journal and the Journal of Urban Economics.
Georg Weizsäcker
Received his doctoral degree at Harvard University in 2004, then worked in the Economics Departments of LSE and UCL in London, and is now Professor of Economics at Humboldt-Universität zu Berlin. He has been appointed to multiple offices and advisory roles in academia and policy, and has previously acted as Recruitment Director of the Berlin School of Economics. Currently, Georg Weizsäcker acts as Deputy Spokesperson of the DFG-funded Collaborative Research Center TRR 190 "Rationality and Competition". His main research areas are behavioral economics and applied microeconomics.
