Long-run expectations of households

The rational expectations assumption, e.g. in life-cycle models and portfolio-choice models, prescribes that all actions are line with a well-structured unbiased system of expectations. In reality, justification identification nontrivial, we lack empirical evidence especially for the long run. This paper starts to fill this gap elicits short-run long-run sample households is designed be representative universe German households. We focus on about three highly welfare-relevant markets: stock market, labor housing market. show linear extrapolations can approximate but not financial or markets. latter two markets, severely below price growth far historical values. extreme pessimism does extend where fairly close also document substantial heterogeneity by socio-economic personal characteristics, e.g., females more pessimistic than males outcomes