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Gender, overconfidence, and optimal group composition for investment decisions

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  • Baiba Renerte
  • Jan Hausfeld
  • Torsten Twardawski

Abstract

How to compose boards of directors for optimal investment decision making? Depending on the group composition, each member’s characteristics — like gender and motivated beliefs — can influence the final group decision, especially if the particular investment situation leaves room for decision biases. We design two types of investment situations in a laboratory experiment — one with fixed chances of success and one with performancedependent chances of success. Our design entails the board members’ perceived ability to “beat the odds†of the market and thus models real-life investment situations more accurately than standard lottery choices. We find support for mixed group composition in terms of both gender and overconfidence: Groups with more men and more overconfident group members overinvest when a possibility to “beat the odds†is present, while standard situations do not allow for such pronounced effects. We explore several channels for our results, including (i) risk perception, (ii) responsibi lity allocation and (iii) spillover effects from priming and communication.

Suggested Citation

  • Baiba Renerte & Jan Hausfeld & Torsten Twardawski, 2020. "Gender, overconfidence, and optimal group composition for investment decisions," TWI Research Paper Series 121, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
    • Handle: RePEc:twi:respas:0121
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    Keywords

    motivated beliefs; overconfidence; gender differences; risky decisions; laboratory experiment; experimental finance;
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