DO SELF-THEORIES EXPLAIN OVERCONFIDENCE AND FINANCIAL RISK TAKING? A field experiment

Bertrand Koebel, André Schmitt and Sandrine Spaeter

Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg

Abstract: How people develop beliefs about themselves (self-theories) plays an important role on motivation and achievement as shown by Carol Dweck’s life-long research. In this paper, we conduct a field experiment to investigate whether self-theories impact overconfidence and risk taking. Self-theories deal with how an individual perceives some of her attributes such as intelligence, personality or moral character. In this paper, we are interested by how people perceive their mindset (fixed or growth). All decisions taken by young Vietnamese executives were incentivized to identify their degree of overconfidence and risk taking. As in previous studies, we find that subjects exhibit significant overconfidence. We also find that fixed mindset subjects are less over-confident than growth mindset persons, the latter earning the highest incomes in our experiment. Finally, we find correlation between risk taking and overconfidence. However, contrary to the existing results in the literature on behavioral finance, in our experiment, the higher the degree of overconfidence, the lower the investment in risky lotteries. Gender does not seem to have any impact on neither overconfidence nor risk-taking behavior.

Keywords: overconfidence, experiment; self-theories, mindset, risk-taking. (search for similar items in EconPapers)
JEL-codes: C93 D81 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-neu and nep-sea
References: Add references at CitEc
Citations:

Downloads: (external link)
http://beta.u-strasbg.fr/WP/2015/2015-04.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2015-04

Access Statistics for this paper

More papers in Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg Contact information at EDIRC.
Bibliographic data for series maintained by ( this e-mail address is bad, please contact ).