Professional forecasters' heterogeneous narratives about how inflation affects stock markets in 2023 rationalize their high disagreement regarding quantitative…
Professional forecasters' heterogeneous narratives about how inflation affects stock markets in 2023 rationalize their high disagreement regarding quantitative expectations for 12-month-ahead inflation and stock returns in December 2022. Professional forecasters causally update their return expectations in heterogeneous directions in response to information about the inflation outlook, depending on the narrative they entertain. Moreover, the narratives also affect their asset allocation in a hypothetical portfolio-choice experiment. Providing common signals does not necessarily lead to convergence of beliefs if agents subscribe to different narratives. We would like to thank Hassan Afrouzi, Martin Brown, Tabea Bucher-Koenen, Peter Buchmann, Volker Clausen, Zeno Enders, Nicola Gennaioli, Alexander Glas, Lukas Hack, Michael Lamla, Bartosz Maćkowiak, Lora Pavlova, Davud Rostam-Afschar, Stefan Trautmann, and Johannes Wohlfart as well as seminar and conference participants at the ZEW in Mannheim (June 2024), Heidelberg University (July 2024), the 6th Behavioral Macroeconomics Workshop on Heterogeneity and Expectations in Macroeconomics and Finance (July 2024), the 11th HKMetrics Workshop (July 2024), the ZEW-FMT Workshop (September 2024), the 7th Joint Statistical Meeting of the Deutsche Arbeitsgemeinschaft Statistik (DAGStat) in Berlin (March 2025), the 8th Workshop on Subjective Expectations at Nova School of Business & Economics in Lisbon (June 2025), the Workshop Heterogenous Macro Expectations at the Friedrich-Alexander-University Erlangen-Nuremberg (September 2025), the 15th ifo Conference on Macroeconomics and Survey Data (October 2025), the 6th HeiTüHo Workshop in Hohenheim (December 2025), the 5th Investor Emotions & Asset Pricing in Lille (February 2026), the Economics Seminar at University of Duisburg-Essen (June 2026), the IAAE Annual Conference at Nova School of Business and Economics, Lisbon (June 2026), and the Advances with Field Experiments (AFE) Conference at the University of Chicago (September 2026) for helpful comments and suggestions. We are grateful to the Leibniz Centre for European Economic Research in Mannheim (ZEW) for including our questions in the ZEW Financial Market Survey. The survey data was obtained under a non-disclosure agreement. Any results, analysis, and observations published within this work do not necessarily correspond to results or analysis of the data providers. Funding by the German Federal Ministry of Education and Research (BMBF) and the Baden-Wuerttemberg Ministry of Science as part of Germany's Excellence Strategy (ExU 10.2.31) is gratefully acknowledged. The views expressed herein are those of the authors. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. In addition toworking papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals—theNBER Reporter, theNBER Digest, theBulletin on Health, theBulletin on the Economics of Alzheimer's, and theBulletin on Entrepreneurship—as well asresearch spotlights, lectures, and panel videos.