Overweighting Private Information: Three Measures, One Bias?
Overweighting private information is often used to explain various detrimental decisions. In behavioral economics and finance, it is usually modeled as a direct consequence of misperceiving signal reliability. This bias is typically dubbed overconfidence and linked to the judgment literature in psychology. Empirical tests of the models often fail to find evidence for the predicted effects of overconfidence. These studies assume, however, that a specific type of overconfidence, i.e., "miscalibration," captures the underlying trait. We challenge this assumption and borrow the psychological methodology of single-cue probability learning to obtain a direct measure for overweighting private information. We find that overweighting private information and measures of "miscalibration" are unrelated, indicating that different kinds of misperceptions are at work. Thus, in order to test the theoretical predictions of the overconfidence literature in economics and finance, one cannot rely on the well-established "miscalibration" bias. We find no gender differences in overconfidence for our measures except for one, where women are more overconfident than men.
|Date of creation:||25 Aug 2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +049 3641/ 9 43000
Fax: +049 3641/ 9 43000
Web page: http://www.jenecon.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- O'Connor, Marcus & Lawrence, Michael, 1992. "Time series characteristics and the widths of judgemental confidence intervals," International Journal of Forecasting, Elsevier, vol. 7(4), pages 413-420, March.
When requesting a correction, please mention this item's handle: RePEc:jrp:jrpwrp:2010-058. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Markus Pasche)
If references are entirely missing, you can add them using this form.