Judgmental overconfidence and trading activity

Fellner-Röhling, Gerlinde; Krügel, Sebastian

doi:10.1016/j.jebo.2014.04.016

Cited by 30 publications

(11 citation statements)

References 39 publications

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“…Overconfidence can be separated in three facets; overconfidence about the certainty of information (miscalibration), overconfidence about ability (better-than-average effect) or overconfidence about performance on certain tasks (overestimation) (Moore & Healy, 2008). Whilst miscalibration is purported as the cause of overtrading (Daniel, Hirshleifer, & Subrahmanyam, 1998), studies have also shown this aspect of overconfidence, as measured by calibration questions, is unrelated to trading volume (Fellner-Röhling & Krügel, 2014;Glaser & Weber, 2007). Research has found that the better-than-average effect has more of an influence on trading frequency.…”

Section: Who Trades Frequently?mentioning

confidence: 99%

Who trades profusely? The characteristics of individual investors who trade frequently

Richards

Willows

2018

Global Finance Journal

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Research has shown that investors trade too frequently and that this overtrading lowers investment return. This paper examines the characteristics of those investors that trade frequently. Using over three years of trading data of 7 200 investors at a brokerage firm in the UK, descriptive statistics and multiple regression analyses were able to identify the predictive characteristics of investors that trade often. Most noteworthy is that trading frequency is positively skewed resulting in a small proportion of investors doing the majority of the trading with the highest cumulative value. These frequent trading investors tend to be male, younger and make use of multiple mediums of trading to trade. These mediums include the internet, the telephone, an advice team and use of stop losses.

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Section: Who Trades Frequently?mentioning

confidence: 99%

Who trades profusely? The characteristics of individual investors who trade frequently

Richards

Willows

2018

Global Finance Journal

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“…3 To sum up, the better-than-average effect has been partially successful in predicting trade volume while miscalibration has been generally unsuccessful. Additionally, the better-than-average effect has been found to be more pronounced in men than in women (Bengtsson et al, 2005;Beyer, 1990;Beyer and Bowden, 1997;Niederle and Vesterlund, 2007), while miscalibration has not (Biais et al, 2005;Deaves et al, 2008;Fellner-Röhling and Krügel, 2014). Both of these facts suggest that the better-thanaverage effect is a more appropriate measure than miscalibration to try to explain the gender gap in trade volume.…”

Section: Measures Of Overconfidence In Financementioning

confidence: 99%

Boys will still be boys: Gender differences in trading activity are not due to differences in (over)confidence

Cueva

Iturbe-Ormaetxe

Ponti

et al. 2019

Journal of Economic Behavior & Organization

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The fact that men trade more than women in financial markets has been attributed to men's overconfidence. However, evidence supporting this view is only indirect. We directly test this conjecture experimentally, by measuring confidence using monetary incentives before participants trade in a simulated market. We find that men are more confident than women in our trading task. Men also trade more, and they hold larger and less diversified portfolios than women. However, we do not find that differences in confidence explain any portion of the gender gap in trading activity. We explore alternative candidate channels such as risk aversion, financial literacy or competitiveness but find that these factors are also unlikely to play a role.

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“…Many studies have found that decision makers with high confidence are likely to overestimate the accuracy of their judgment – a phenomenon called overconfidence (Lichtenstein et al , 1977; Doherty et al , 1979; Harvey, 1997; Klayman et al , 1999; Fellner and Krügel, 2012; Fellner-Röhling and Krügel, 2014; Thunström et al , 2015; Merkle, 2017). Moore and Healy (2008) and Bazerman and Moore (2008) found three principal forms of overconfidence: over-estimation of one’s actual performance; over-placement of one’s performance compared to others’; and over-precision about the accuracy of one’s judgment.…”

Section: Manifestations Of Bias In Cpdrmentioning

confidence: 99%

Biases in construction project dispute resolution

Cheung

2019

ECAM

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Purpose This study aims to propose a framework of bias in construction project dispute resolution (CPDR hereafter). Design/methodology/approach With reference to the literatures on effects of bias, manifestations of bias in CPDR were developed. Based on data obtained from construction professionals about their frequency of having these bias manifestations, the underlying constructs of biased behaviors were explored by a principal component factor analysis. A confirmatory factor analysis was further conducted to validate the framework of bias in CPDR. Findings Four types of bias were identified as the constructs that underlie biased behaviors in CPDR. These four biases were included in the bias framework proposed: preconception, self-affirmation, optimism and interest-oriented. The potency of these types of bias was also evaluated. Practical implications First, the findings inform that the existence of bias in CPDR is real. Early detection allows management to intervene and steer CPDR team back to rational courses. Second, this study suggests optimizing CPDR procedures to diminish the chance of bias occurring. Originality/value Bias is almost an uncharted area in CPDR. The study fills this research gap by conceptualizing the underlying constructs of biased behaviors. The findings inform construction professionals of the likelihood of practicing biased behaviors in CPDR. Repeated dispute decisions in the commonly used multi-tiered dispute resolution process would enable the creeping in of biases.

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Judgmental overconfidence and trading activity

Cited by 30 publications

References 39 publications

Who trades profusely? The characteristics of individual investors who trade frequently

Who trades profusely? The characteristics of individual investors who trade frequently

Boys will still be boys: Gender differences in trading activity are not due to differences in (over)confidence

Biases in construction project dispute resolution

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