Self-attribution bias and overconfidence among nonprofessional traders

Daniel Czaja and Florian Röder

The Quarterly Review of Economics and Finance, 2020, vol. 78, issue C, 186-198

Abstract: We investigate consequences of the self-attribution bias for nonprofessional traders. By applying a textual analysis of more than 44,000 public comments on a large social trading platform, we contribute to empirical literature on investment and trading behavior in three ways: First, we show that one component of the self-attribution bias, the self-enhancement bias, leads to subsequent underperformance. Second, results support the theory that traders become overconfident due to biased self-enhancement. Third, we find that traders’ social trading portfolios attract higher investment flows from investors when showing self-enhancement biased behavior.

Keywords: Self-attribution bias; Overconfidence; Individual investors; Trading behavior; Social trading (search for similar items in EconPapers)
JEL-codes: D14 G11 G41 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:78:y:2020:i:c:p:186-198

DOI: 10.1016/j.qref.2020.02.003

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