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Potential Underdog Bias, Overconfidence and Risk Propensity in Investor Decision-Making Behavior

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  • Sean Combrink
  • Charlene Lew

Abstract

In this study we investigate whether investors are prone to take risks, both in terms of how they rate their risk propensity and their behavior in choosing between options with different risk levels, and whether they display overconfidence and underdog bias. We also investigate the relationships among underdog bias, overconfidence and risk propensity. The results indicate overconfidence levels similar to that in other populations and do not reveal underdog bias or high levels of risk propensity. We found support for a negative predictive relationship between underdog bias and overconfidence.

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  • Sean Combrink & Charlene Lew, 2020. "Potential Underdog Bias, Overconfidence and Risk Propensity in Investor Decision-Making Behavior," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 21(4), pages 337-351, October.
    • Handle: RePEc:taf:hbhfxx:v:21:y:2020:i:4:p:337-351
    DOI: 10.1080/15427560.2019.1692843
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    Cited by:

    1. Serhat Yuksel & Cagatay Caglayan, 2020. "The Factors Affecting the Investors’ Decisions: A Study on Nuclear Energy Investments," Economics Literature, WERI-World Economic Research Institute, vol. 2(2), pages 177-185, December.
    2. Zeeshan Ahmed & Shahid Rasool & Qasim Saleem & Mubashir Ali Khan & Shamsa Kanwal, 2022. "Mediating Role of Risk Perception Between Behavioral Biases and Investor’s Investment Decisions," SAGE Open, , vol. 12(2), pages 21582440221, May.

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