We provide a data-driven analysis of how investor expectations about economic growth and stock market returns changed during the February-March 2020 stock market crash induced by the COVID-19 pandemic  . We surveyed wealthy retail investors who are clients of Vanguard in mid-February 2020 , around the all-time stock market high, and then again on March 11 and 12 , after the stock market had collapsed by over 20 \%. The average investor turned more pessimistic about the short-run performance of both stock markets and the economy. Investors also perceived higher probability of both further extreme stock market declines and large declines in short-run real economic activity. In contrast, investors' expectations about the long run remained largely unchanged, and if anything improved. Disagreement among investors about economic and stock market outcomes also increased substantially. Our analysis is an input in both the design of the ongoing economic policy response and in further advancing economic theories. \\%DIF > , and (iii) on April 16-17, after the market had rallied 25\\% from its lowest point. Following the crash, the average investor turned more pessimistic about the short-run performance of both the stock market and the real economy. Investors also perceived higher probabilities of both further extreme stock market declines and large declines in short-run real economic activity. In contrast, investor expectations about long-run (10-year) economic and stock market outcomes remained largely unchanged, and, if anything, improved. Disagreement among investors about economic and stock market outcomes also increased substantially following the stock market crash, with the disagreement persisting through the partial market recovery. Those respondents who were the most optimistic in February saw the largest decline in expectations, and sold the most equity. Those respondents who were the most pessimistic in February largely left their portfolios unchanged during and after the crash.
We analyze how investor expectations about economic growth and stock returns changed during the February-March 2020 stock market crash induced by the COVID-19 pandemic , as well as during the subsequent partial stock market recovery . We surveyed retail investors who are clients of Vanguard at three points in time: (i) on February 11-12 , around the all-time stock market high, (ii) on March 11-12 , after the stock market had collapsed by over 20 \\%DIF > , and (iii) on April 16-17, after the market had rallied 25\\% from its lowest point. Following the crash, the average investor turned more pessimistic about the short-run performance of both the stock market and the real economy. Investors also perceived higher probabilities of both further extreme stock market declines and large declines in short-run real economic activity. In contrast, investor expectations about long-run (10-year) economic and stock market outcomes remained largely unchanged, and, if anything, improved. Disagreement among investors about economic and stock market outcomes also increased substantially following the stock market crash, with the disagreement persisting through the partial market recovery. Those respondents who were the most optimistic in February saw the largest decline in expectations, and sold the most equity. Those respondents who were the most pessimistic in February largely left their portfolios unchanged during and after the crash.
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provide a data-driven analysis of
analyze
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market
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, as well as during the subsequent partial stock market recovery
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wealthy
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in mid-February 2020
at three points in time: (i) on February 11-12
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and then again on March 11 and 12
(ii) on March 11-12
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\%. The average investor turned more pessimistic about the short-run performance of both stock markets and the economy. Investors also perceived higher probability of both further extreme stock market declines and large declines in short-run real economic activity. In contrast, investors' expectations about the long run remained largely unchanged, and if anything improved. Disagreement among investors about economic and stock market outcomes also increased substantially. Our analysis is an input in both the design of the ongoing economic policy response and in further advancing economic theories.