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The dynamics of overconfidence: Evidence from stock market forecasters

  • Richard Deaves

    ()

    (McMaster University)

  • Erik Lüders

    ()

    (Pinehill Capital and Laval University)

  • Michael Schröder

    (Center for European Economic Research (ZEW))

As a group, market forecasters are egregiously overconfident. In conformity to the dynamic model of overconfidence of Gervais and Odean (2001), successful forecasters become more overconfident. What’s more, more experienced forecasters have “learned to be overconfident,” and hence are more susceptible to this behavioral flaw than their less experienced peers. It is not just individuals who are affected. Markets also become more overconfident when market returns have been high.

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File URL: http://cofe.uni-konstanz.de/Papers/dp05_10.pdf
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Paper provided by Center of Finance and Econometrics, University of Konstanz in its series CoFE Discussion Paper with number 05-10.

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Length: 33 pages
Date of creation: 07 Oct 2005
Date of revision:
Handle: RePEc:knz:cofedp:0510
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