EconPapers    
Economics at your fingertips  
 

Illusion of Expertise in Portfolio Decisions - An Experimental Approach -

Gerlinde Fellner-Röhling (), Werner Güth () and Boris Maciejovsky

Papers on Strategic Interaction from Max Planck Institute of Economics, Strategic Interaction Group

Abstract: Overall, 72 subjects invest their endowment in four risky assets. Each combination 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 ask to elect their "expert" based on responses to a prior decision task. Using the random price machanism reveals that 64% of the subjects prefer their own portfolio over the average group portfolio or the expert's portfolio. 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)
JEL-codes: C91 D80 D84 G11 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2001-11
New Economics Papers: this item is included in nep-exp
Note: Financial support by the Deutsche Forschungsgemeinschaft (SFB-373, C5) is gratefully acknowledged. We are indebted to Silke Meiner, Sylvia Schikora, and Volker Zieman for their research assistance. Valuable comments by Richard Thaler, Martin Weber and by participants at the GEW-meeting in Magdeburg are also acknowledged.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
ftp://papers.econ.mpg.de/esi/discussionpapers/2001-02.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Failed to connect to FTP server papers.econ.mpg.de: No such host is known.

Related works:
Journal Article: Illusion of expertise in portfolio decisions: an experimental approach (2004) Downloads
Working Paper: Illusion of Expertise in Portfolio Decisions - An Experimental Approach (2001) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:esi:discus:2001-02

Ordering information: This working paper can be ordered from
http://www.econ.mpg. ... arch/ESI/discuss.php

Access Statistics for this paper

More papers in Papers on Strategic Interaction from Max Planck Institute of Economics, Strategic Interaction Group Contact information at EDIRC.
Bibliographic data for series maintained by Karin Richter ( this e-mail address is bad, please contact ).

 
Page updated 2022-05-13
Handle: RePEc:esi:discus:2001-02