Judgmental overconfidence and trading activity

Gerlinde Fellner-Röhling () and Sebastian Krügel

Journal of Economic Behavior & Organization, 2014, vol. 107, issue PB, 827-842

Abstract: We investigate the theoretically proposed link between judgmental overconfidence and trading activity. In addition to applying classical measures of miscalibration, we introduce a measure to capture misperception of signal reliability, which is the relevant bias in the theoretical overconfidence literature. We relate the obtained overconfidence measures to trading activity in call and continuous experimental asset markets. Our results confirm prior findings that classical miscalibration measures are not related to trading activity. Misperception of signal reliability is positively related to trading volume in the continuous market for one of two treatments. In the other one, no relation is found except that highly overconfident subjects trade less. In addition, we find that men trade more than women at high levels of risk aversion, but the gender trading gap vanishes as risk aversion lessens. The reason is that the trading activity of women seems to be more sensitive to risk attitudes than that of men.

Keywords: Overconfidence; Trading activity; Signal perception (search for similar items in EconPapers)
JEL-codes: C91 D03 G12 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Judgmental Overconfidence and Trading Activity (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:107:y:2014:i:pb:p:827-842

DOI: 10.1016/j.jebo.2014.04.016

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