Overconfidence in investment decisions: An experimental approach

Dennis Alexis Valin Dittrich (), Werner Güth () and Boris Maciejovsky

European Journal of Finance, 2005, vol. 11, issue 6, pages 471-491

Abstract: By experimentally inducing risk aversion, overconfidence in an investment setting is investigated, comparing the evaluation of actual investment decisions with alternative choices. After selecting their own investment, subjects confront three alternative investment choices, including the optimal one, and are asked about their willingness to pay and to substitute their own for alternative choices. Overconfidence is defined as the persistent overevaluation of the own investment decision. Results indicate that overconfidence increases (i) with the absolute deviation from optimal choices, (ii) with task complexity involving the number of risky assets, and (iii) decreases with individual perceived uncertainty.

Keywords: Risky decision making; behavioural finance; portfolio choice; experimental economics (search for similar items in EconPapers)
Date: 2005
View list of references View citations in EconPapers

Downloads: (external link)
http://taylorandfrancis.metapress.com/link.asp?tar ... &id=KXH60U6H27Q65630 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Overconfidence in Investment Decisions: An Experimental Approach
Working Paper: Overconfidence in Investment Decisions: An Experimental Approach (2001)
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: http://EconPapers.repec.org/RePEc:taf:eurjfi:v:11:y:2005:i:6:p:471-491

Ordering information: This journal article can be ordered from
http://www.tandf.co.uk/journals/subscription.html

Access Statistics for this article

European Journal of Finance is edited by Chris Adcock

More articles in European Journal of Finance from Taylor and Francis Journals
Series data maintained by Christopher F. Baum ().