Overconfidence, Stability and Investments
Roberta Dessi and
Xiaojian Zhao ()
No 15-580, TSE Working Papers from Toulouse School of Economics (TSE)
The available evidence from numerous studies suggests that overconfidence varies significantly across countries. We develop a model that endogenizes these differences and examines their economic consequences. A crucial determinant of difierences in overconfidence is the degree of expected stability of the environment, with greater changefulness giving rise to more overconfident beliefs. When stability is endogenized, multiple equilibria can emerge, \dynamism" and overconfidence reinforcing each other in one case, stability and realistic self-assessment in another. Evidence from 38 countries is consistent with this relationship. Finally, our model also sheds some light on differences in overconfidence within countries, as well as exploring the interaction between overconfidence and sensitivity to shame.
Keywords: Self-confidence; investment; cultural differences; cultural transmission; shame (search for similar items in EconPapers)
JEL-codes: D03 D83 Z1 (search for similar items in EconPapers)
Date: 2015-05, Revised 2017-09
New Economics Papers: this item is included in nep-cbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
https://www.tse-fr.eu/sites/default/files/TSE/docu ... /2015/wp_tse_580.pdf Full text (application/pdf)
Journal Article: Overconfidence, stability and investments (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:29327
Access Statistics for this paper
More papers in TSE Working Papers from Toulouse School of Economics (TSE) Contact information at EDIRC.
Bibliographic data for series maintained by ().