Investor overconfidence in experimental asset markets across market states

Chris Meier, Lurion De Mello

Research output: Contribution to journalArticleResearchpeer-review

Abstract

This study explores how individual overconfidence adjusts after receiving extreme feedback that either supports or contradicts previous decision-making when buying or selling stocks. We find that highly contradicting feedback causes overconfidence to vanish as confidence declines sharply while supportive signals cause overconfidence to increase. Further evidence suggests that strong feedback impulses are associated with higher investor disagreement, supporting prior hypotheses that investors interpret such impulses differently. We also find that methodologies that measure overconfidence in prediction tasks systematically overstate confidence scores as respondents tend to fail to internalize stated confidence intervals appropriately.

LanguageEnglish
JournalJournal of Behavioral Finance
DOIs
Publication statusE-pub ahead of print - 25 Nov 2019

Fingerprint

Decision Making
Confidence Intervals
Investors
Market states
Overconfidence
Experimental asset markets
Impulse
Confidence
Surveys and Questionnaires
Prediction
Methodology
Decision making
Confidence interval

Keywords

  • Experimental methods
  • Investor disagreement
  • Investor overconfidence
  • Overconfidence
  • Overconfidence crash

Cite this

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Investor overconfidence in experimental asset markets across market states. / Meier, Chris; De Mello, Lurion.

In: Journal of Behavioral Finance, 25.11.2019.

Research output: Contribution to journalArticleResearchpeer-review

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