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Overconfidence, Experience, and Professionalism: An Experimental Study

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  • Lukas Menkhoff
  • Maik Schmeling
  • Ulrich Schmidt

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

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1612.

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Length: 17 pages
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:kie:kieliw:1612

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Keywords: Market behavior; overconfidence; experience; professionalism;

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Cited by:
  1. Pereira Reichhardt, Joaquín & Iqbal, Tabassum, 2014. "Investment Decisions: Are we fully-Rational?," MPRA Paper 57686, University Library of Munich, Germany.
  2. Michailova, Julija, 2010. "Overconfidence, Risk Aversion and Individual Financial Decisions in Experimental Asset Markets," MPRA Paper 53114, University Library of Munich, Germany, revised Jan 2014.
  3. Proeger, Till & Meub, Lukas, 2014. "Overconfidence as a social bias: Experimental evidence," Economics Letters, Elsevier, Elsevier, vol. 122(2), pages 203-207.

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