Measuring overconfidence: Methodological problems and statistical artifacts

Henrik Olsson

Journal of Business Research, 2014, vol. 67, issue 8, 1766-1770

Abstract: Psychological studies are frequently cited in the business and finance literature to bolster claims that various kinds of economic disasters, from the large proportion of start-ups that quickly go out of business to the exaggerated confidence of financial investors, can be attributed to overconfidence. This article reviews some of the problems associated with concluding that people overestimate the accuracy of their judgments based on observed overconfidence measured as the difference between mean subjective probability and proportion correct. Methodological and statistical artifacts, such as regression, can explain many of the observed instances of apparent overconfidence.

Keywords: Overconfidence; Underconfidence; Format dependence; Regression (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:67:y:2014:i:8:p:1766-1770

DOI: 10.1016/j.jbusres.2014.03.002

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