Overconfidence and Disappointment in Decision‐making under Risk: The Triumph of Hope over Experience

Jeffrey L. Ringuest and Samuel B. Graves

Managerial and Decision Economics, 2017, vol. 38, issue 3, 409-422

Abstract: Overconfidence in economic decision‐making is a well‐established phenomenon; however, assessment of its scale and impact are largely absent from the literature. This paper uses Bell's disappointment metric to quantify its impact on individual decision‐makers in a risky investment setting. We are able to quantify the sensitivity of disappointment to overconfidence. We examine disappointment in both deterministic and stochastic models, finding that in the most likely cases, individual investors experience lower disappointment when variance is higher. We are also able to quantify and compare calibration‐based overconfidence and better‐than‐average overconfidence. Contrary to prior research, we find that their magnitudes are the same. Copyright © 2016 John Wiley & Sons, Ltd.

Date: 2017
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/

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:wly:mgtdec:v:38:y:2017:i:3:p:409-422

Access Statistics for this article

Managerial and Decision Economics is currently edited by Antony Dnes

More articles in Managerial and Decision Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().