Illusion of Expertise in Portfolio Decisions - An Experimental Approach

Gerlinde Fellner, Werner Güth () and Boris Maciejovsky

No 621, CESifo Working Paper Series from CESifo

Abstract: Overall, 72 subjects invest their endowment in four risky assets. Each com-bination of assets yields the same expected return and variance of returns. Illusion of expertise prevails when one prefers nevertheless the self-selected portfolio. After being randomly assigned to groups of four subjects are asked to elect their "expert" based on responses to a prior decision task. Using the random price mecha-nism reveals that 64% of the subjects prefer their own portfolio over the average group portfolio or the expert’s port-folio. Illusion of expertise is shown to be stable individually, over alternatives, and for both eliciting methods, willingness to pay and to accept.

Keywords: investment decisions; portfolio selection; overconfidence; unrealistic optimism; illusion of control; endowment effect (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Illusion of expertise in portfolio decisions: an experimental approach (2004)
Working Paper: Illusion of Expertise in Portfolio Decisions - An Experimental Approach - (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_621

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