Effect of emotion regulation as a de-biasing mechanism on overconfidence in investment behavior

Meeja Im () and JaeEun Oh ()
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Meeja Im: Cyber University of Korea
JaeEun Oh: Grinnell College

Journal of Financial Services Marketing, 2016, vol. 21, issue 3, No 4, 209-225

Abstract: Abstract Overconfidence is a bias closely associated with strong positive emotions such as pride. Strong positive emotions can hamper effective decision-making. This paper is predicated on the hypothesis that if investors with a pronounced tendency toward overconfidence can regulate strong positive emotions, they will be able to reduce bias and avoid subpar investment performance. We investigated the relationships among overconfidence, positive emotional reactions, and strategies for regulating emotions after a gain in the stock investment area, where investors succumb to overconfidence and important financial decisions are made. Identifying the differences in cognitive processes and emotion regulation strategies, which more or less overconfident investors exhibit, will in turn provide a de-bias mechanism to reduce overconfidence. The findings of this research will help investors avoid overconfidence by using strategies for emotional regulation reported in this study in order to achieve decision excellence.

Keywords: decision-making; overconfidence; positive emotions; de-bias; emotion regulation strategies; investment behavior (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1057/s41264-016-0003-4

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