Sexonomics: Gender,wealth,and expectations in financial markets

Abstract

I present evidence of systematically heterogeneous expectations, a violation of the Rational Expectations Hypothesis. I demonstrate that the expectations of different gender and wealth cohorts have different relative abilities to predict inflation, interest rates, unemployment, income, stock prices, and the housing market. There is evidence of differences in learning and cognition. Using a cross-sectional analysis, I demonstrate that the influence of gender on housing market expectations is robust in controlling for other demographic factors, such as income, education, race, age, and marital status. Over the full thirty-year sample period, as well as during the 2002–2006 housing bubble period, men were significantly more optimistic than women in their home price expectations with lower dispersion of expectations. The results cast doubt on the Rational Expectations Hypothesis and complement recent findings in the emerging field of Neuroeconomics.