Asset pricing techniques designed to estimate an SDF from prices can be applied to survey expectations to estimate a Subjective Belief Factor (SBF): a distortion that characterizes many subjective expectations simultaneously. We find that differences between subjective expectations and statistical expectations for 24 macroeconomic variables can be summarized (average R-squared of 50%) by a single SBF related to RGDP growth and the T-bill rate. This SBF also accurately replicates differences across the 24 variables in under/overreaction. Further, the SBF provides a parsimonious way to incorporate beliefs data into asset pricing models, even those with many expectations. Our estimated belief distortion explains most excess returns for the Fama-French factors and two-thirds of cross-sectional differences in returns for 176 anomalies, with the remainder attributed to preferences/risk. The results support models like robust control and certain versions of diagnostic expectations, in which a single distortion shapes beliefs across variables.
Tingyue Cui
Contact Information
- Primary Email:
ritacui@wharton.upenn.edu - Office Phone:
215-898-7622
- office Address:
2420B Steinberg-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104
Research Interests: Asset Pricing, Innovation, Fintech, Machine Learning
Activity
Latest Research
Tingyue Cui, Ricardo Delao, Sean Myers (2026), The Subjective Belief Factor, Forthcoming at the Journal of Finance.
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