Overconfidence of Professionals and Lay Men: Individual Differences Within and Between Tasks?
Overconfidence can manifest itself in various forms. For example, people think that their knowledge is more precise than it really is (miscalibration) and they believe that their abilities are above average (better than average effect). The questions whether judgment biases are related or whether stable individual differences in the degree of overconfidence exist, have long been unexplored. In this paper, we present two studies that analyze whether professional traders or investment bankers who work for international banks are prone to judgment biases to the same degree as a population of lay men. We examine whether there are robust individual differences in the degree of overconfidence within various tasks. Furthermore, we analyze whether the degree of judgment biases is correlated across tasks. Based on the answers of 123 professionals, we find that expert judgment is biased. In most tasks, their degrees of overconfidence are significantly higher than the respective scores of a student control group. In line with the literature, we find stable individual differences within tasks (e.g. in the degree of miscalibration). However, we find that correlations across distinct tasks are sometimes insignificant or even negative. We conclude that some manifestations of overconfidence, that are often argued to be related, are actually unrelated.
|Date of creation:||27 Apr 2005|
|Note:||Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.|
|Contact details of provider:|| Postal: D-68131 Mannheim|
Phone: (49) (0) 621-292-2547
Fax: (49) (0) 621-292-5594
Web page: http://www.sfb504.uni-mannheim.de/
More information through EDIRC
Web page: http://www.sfb504.uni-mannheim.de
|Order Information:|| Email: |
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.:
- Terrance Odean, 1998. "Volume, Volatility, Price and Profit When All Traders Are Above Average," Finance 9803001, EconWPA.
- Michael S. Haigh & John A. List, 2005.
"Do Professional Traders Exhibit Myopic Loss Aversion? An Experimental Analysis,"
Journal of Finance,
American Finance Association, vol. 60(1), pages 523-534, 02.
- Haigh, Michael S. & List, John A., 2002. "Do Professional Traders Exhibit Myopic Loss Aversion? An Experimental Analysis," Working Papers 28554, University of Maryland, Department of Agricultural and Resource Economics.
- Michael Haigh & John List, 2005. "Do professional traders exhibit myopic loss aversion? An experimental analysis," Artefactual Field Experiments 00052, The Field Experiments Website.
- Kirchler, Erich & Maciejovsky, Boris, 2002. "Simultaneous Over- and Underconfidence: Evidence from Experimental Asset Markets," Journal of Risk and Uncertainty, Springer, vol. 25(1), pages 65-85, July.
- Maciejovsky, B. & Kirchler, E., 2001. "Simultaneous Over-and Underconfidence: Evidence from Experimental Aseet Markets," Papers 185, Flinders of South Australia - Discipline of Economics.
- Maciejovsky, Boris & Kirchler, Erich, 2001. "Simultaneous over- and underconfidence: Evidence from experimental asset markets," SFB 373 Discussion Papers 2001,44, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Alba, Joseph W & Hutchinson, J Wesley, 2000. " Knowledge Calibration: What Consumers Know and What They Think They Know," Journal of Consumer Research, Oxford University Press, vol. 27(2), pages 123-156, September.
- Bruno Biais & Denis Hilton & Karine Mazurier & Sébastien Pouget, 2005. "Judgemental Overconfidence, Self-Monitoring, and Trading Performance in an Experimental Financial Market," Review of Economic Studies, Oxford University Press, vol. 72(2), pages 287-312.
- Biais, Bruno & Hilton, Denis & Mazurier, Karine & Pouget, Sébastien, 2004. "Judgmental Overconfidence, Self-Monitoring and Trading Performance in an Experimental Financial Market," IDEI Working Papers 259, Institut d'Économie Industrielle (IDEI), Toulouse.
- Benos, Alexandros V., 1998. "Aggressiveness and survival of overconfident traders," Journal of Financial Markets, Elsevier, vol. 1(3-4), pages 353-383, September.
- Terrance Odean, 1998. "Volume, Volatility, Price, and Profit When All Traders Are Above Average," Journal of Finance, American Finance Association, vol. 53(6), pages 1887-1934, December. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:xrs:sfbmaa:05-25. 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: (Carsten Schmidt)
If references are entirely missing, you can add them using this form.