Abstract

We show that individuals’ macroeconomic expectations are influenced by their socioeconomic status (SES). Individuals with higher income or higher education levels are more optimistic about future macroeconomic developments, including business conditions, the national unemployment rate, and stock market returns. In the time series, the spread in beliefs between high-SES and low-SES individuals diminishes significantly during recessions. We document that SES-related differences in macroeconomic expectations are in part driven by different recent changes in people’s personal finances, the type of news they attend to, and the economic conditions in their county of residence. Moreover, we find that SES-driven expectations can help explain why, during non-recession periods, individuals with higher socioeconomic status have more exposure to the stock market and are more inclined to purchase homes, durable goods, or cars.

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• Keyword(s):
• finance 264
• investments 83

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