Extrapolative Uncertainty and Household Economic Behavior

The views presented in this paper are those of the authors and do not necessarily represent those of the Federal Reserve Board or its staff. The authors thank the Editor (David Simchi-Levi), two anonymous referees, Jules Van Binsbergen, Christopher Carroll, Jesse Davis, Victoria Gregory, Christopher Roth, Jacob Sagi, Michael Weber, Nancy Xu, and seminar participants at B.I. Norwegian Business School, Caltech, Columbia University, Copenhagen Business School, Imperial College, Indiana University, Maastricht University, New York University, Oxford University, Rice University, the Swedish House of Finance, University of Amsterdam, University of Calgary, University of North Carolina, University of Texas at Austin, University of Texas at Dallas, as well as participants at the American Economic Association, European Finance Association, Western Finance Association, and Review of Corporate Finance/Review of Asset Pricing Studies Nassau Finance 2019 meetings, the Miami Behavioral Finance 2019 Conference, the New York Fed/European Central Bank 2019 Workshop on Survey Expectations, the 2020 National Bureau of Economic Research Summer Institute Behavioral Macro Workshop, the 2020 Paris December Finance Meeting, the 2021 International Monetary Fund/Federal Reserve Board/American University Uncertainty and Economic Activity: Global Perspectives Conference, and the 2021 John Hopkins Carey Finance Conference for helpful comments and discussion. The authors also thank the staff at the Federal Reserve Bank of New York for help with the Survey of Consumer Expectations data. All remaining errors are ours. An early and substantially different version of this paper was circulated under the title “Expectations Uncertainty and Household Economic Behavior.”