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Judgmental Overconfidence, Self-Monitoring and Trading Performance in an Experimental Financial Market

  • Biais, Bruno
  • Hilton, Denis
  • Mazurier, Karine
  • Pouget, Sébastien

We measure the degree of overconfidence in judgement (in the form of miscalibration, i.e. the tendency to overestimate the precision of one's information) and self-monitoring (a form of attentiveness to social cues) of 245 participants and also observe their behaviour in an experimental financial market under asymmetric information. Miscalibrated traders, underestimating the conditional uncertainty about the asset value, are expected to be especially vulnerable to the winner's curse. High self-monitors are expected to behave strategically and achieve superior results. Our empirical results show that miscalibration reduces and self-monitoring enhances trading performance. The effect of the psychological variables is strong for men but non-existent for women. Copyright 2005, Wiley-Blackwell.

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Paper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 259.

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Date of creation: 2004
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Publication status: Published in The Review of Economic Studies, vol.�72, n°2, avril 2005, p.�287-312.
Handle: RePEc:ide:wpaper:1570
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  23. Matthias Gysler & Jamie Kruse & Renate Schubert, 2002. "Ambiguity and Gender Differences in Financial Decision Making: An Experimental Examination of Competence and Confidence Effects," CER-ETH Economics working paper series 02/23, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
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