Investor Beliefs and Expectation Formation

This article reviews the literature that uses survey data to study expectation formation among investors. We begin by outlining methods for eliciting investor beliefs and summarizing key empirical patterns documented in recent work. Highlighting the persistent cross-sectional heterogeneity in expectations, we then review evidence on the determinants of beliefs, including a new analysis of belief reactions to the tariff announcement in April 2025. Next, we examine how expectations shape financial decision-making, emphasizing the systematic but muted sensitivity of outcomes to belief changes. We conclude by pointing to promising directions for future research on belief measurement, the determinants of expectations, and their implications for policymakers.