Riding the Bubble? Chasing Returns into Illiquid Assets

Danny Yagan

NBER Working Paper No. 20360
Issued in July 2014
NBER Program(s):   AG   PE

Household investors chase stock market returns. Surveys suggest that households intend to "ride the bubble" by buying stocks early in a boom and selling stocks early in a bust. This implies that households use only liquid assets to chase returns. I test this prediction using inflows to fixed annuities---illiquid tax-preferred assets that lock wealth out of the stock market for five to ten years. I find that fixed annuity inflows spike after poor stock market returns, inconsistent with ride-the-bubble intentions and instead indicating buy-and-hold intentions. The results are consistent with households extrapolating recent stock market returns into the long run.

You may purchase this paper on-line in .pdf format from ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.


The NBER Bulletin on Aging and Health provides summaries of publications like this.  You can sign up to receive the NBER Bulletin on Aging and Health by email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w20360

Users who downloaded this paper also downloaded* these:
Bunn and Shiller w20370 Changing Times, Changing Values: A Historical Analysis of Sectors within the US Stock Market 1872-2013
Moreira and Savov w20335 The Macroeconomics of Shadow Banking
Herrera, Ordoñez, and Trebesch w20346 Political Booms, Financial Crises
Hamilton w20355 The Changing Face of World Oil Markets
Hilt w20356 History of American Corporate Governance: Law, Institutions, and Politics
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us