Overconfidence, risk perception and the risk-taking behavior of finance professionals

Marie-Hélène Broihanne, Maxime Merli and Patrick Roger

Finance Research Letters, 2014, vol. 11, issue 2, 64-73

Abstract: This paper highlights the role played by overconfidence and risk perception in the risk-taking behaviors of finance professionals. We interviewed 64 high-level professionals and demonstrate that they are overconfident in both the general and the financial domains. Using a recent measure proposed by Glaser et al. (2013), we indicate that respondents are overconfident in forecasting future stock prices. We demonstrate that the risk they are willing to assume is positively influenced by overconfidence and optimism and negatively influenced by risk perception. However, the stock return volatility anticipated is, in most cases, an insignificant determinant of the risk that professionals are ready to assume.

Keywords: Overconfidence; Risk taking; Risk perception; Finance professionals; Investor behavior (search for similar items in EconPapers)
JEL-codes: G02 G11 G14 G23 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:11:y:2014:i:2:p:64-73

DOI: 10.1016/j.frl.2013.11.002

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