Overconfidence in Currency Markets

Thomas Oberlechner and Carol Osler
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Thomas Oberlechner: Webster University Vienna

No 2, Working Papers from Brandeis University, Department of Economics and International Business School

Abstract: This paper tests the influential hypothesis, typically attributed to Friedman (1953), that irrational traders will be driven out of financial markets by trading losses. The paper’s main finding is that overconfident currency dealers are not driven out of the market. Traders with extensive experience are neither more nor less overconfident than their inexperienced colleagues. We first provide evidence that currency dealers are indeed overconfident, which is notable since they get daily trading practice and face intense financial incentives to accuracy.

Keywords: Overconfidence; imperfect rationality; currency dealers; survival of imperfect rationality (search for similar items in EconPapers)
JEL-codes: F31 G14 G15 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2009-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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http://www.brandeis.edu/economics/RePEc/brd/doc/Brandeis_WP02.pdf First version, 2009 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:brd:wpaper:02

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