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Overconfidence, experience, and professionalism: An experimental study

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  • Menkhoff, Lukas
  • Schmeling, Maik
  • Schmidt, Ulrich

Abstract

This paper presents an online-experiment on overconfidence in the context of financial markets. Our subject pool consists of institutional investors, investment advisors and individual investors, all of them being registered users of a large online platform for market sentiment data. Due to their registration, several socioeconomic characteristics of participants can be controlled for in our analysis. It turns out that there are stable differences in overconfidence between the three investor groups. Moreover, investment experience and age have a significant impact on the degree of overconfidence which goes surprisingly in opposite direction. We argue that these results have important implications for studies analyzing the impact of experience on behavior in (financial) markets.

Suggested Citation

  • Menkhoff, Lukas & Schmeling, Maik & Schmidt, Ulrich, 2013. "Overconfidence, experience, and professionalism: An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 86(C), pages 92-101.
    • Handle: RePEc:eee:jeborg:v:86:y:2013:i:c:p:92-101
    DOI: 10.1016/j.jebo.2012.12.022
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    More about this item

    Keywords

    Market behavior; Overconfidence; Experience; Professionalism;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • F30 - International Economics - - International Finance - - - General

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