Negative Subjective Risk-Return Trade-offs

• DOI: 10.2139/ssrn.4096443
• Publication Date: 2022-05-08T12:43:49Z
• Authors: Chanik Jo; Chen Lin; Yang You
• Keywords: Risk–return spectrum; Expected return; Sample (material)

We elicit individuals' subjective risk and return for savings, stocks, real estate, gold, cryptocurrencies, government bonds based on a representative sample of 2,548 U.S. survey respondents. The majority respondents do not expect higher returns an asset that is perceived as being riskier than other assets, while objective measures exhibit positive risk-return trade-off. This result mainly driven by whose beliefs about expected are misaligned with average returns. Misaligned tend to perceive less likely be holders. Our findings highlight the importance heterogeneous in understanding trade-offs.