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An Experimental Test of the Impact of Overconfidence and Gender on Trading Activity

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  • Richard Deaves
  • Erik Lüders
  • Guo Ying Luo

Abstract

We perform an asset market experiment in order to investigate whether overconfidence induces trading. We investigate three manifestations of overconfidence: calibration-based overconfidence, the better-than-average effect and illusion of control. Novelly, the measure employed for calibration-based overconfidence is task-specific in that it is designed to influence behavior. We find that calibration-based overconfidence does engender additional trade, though the better-than-average also appears to play a role. This is true both at the level of the individual and also at the level of the market. There is little evidence that gender influences trading activity. Copyright 2009, Oxford University Press.

Suggested Citation

  • Richard Deaves & Erik Lüders & Guo Ying Luo, 2009. "An Experimental Test of the Impact of Overconfidence and Gender on Trading Activity," Review of Finance, European Finance Association, vol. 13(3), pages 555-575.
  • Handle: RePEc:oup:revfin:v:13:y:2009:i:3:p:555-575
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    File URL: http://hdl.handle.net/10.1093/rof/rfn023
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