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Gender, overconfidence, and optimal group composition for investment decisions

Baiba Renerte, Jan Hausfeld and Torsten Twardawski

No 121, TWI Research Paper Series from Thurgauer Wirtschaftsinstitut, Universität Konstanz

Abstract: How to compose boards of directors for optimal investment decision making? Depending on the group composition, each member’s characteristics — like gender and motivated beliefs — can influence the final group decision, especially if the particular investment situation leaves room for decision biases. We design two types of investment situations in a laboratory experiment — one with fixed chances of success and one with performancedependent chances of success. Our design entails the board members’ perceived ability to “beat the odds†of the market and thus models real-life investment situations more accurately than standard lottery choices. We find support for mixed group composition in terms of both gender and overconfidence: Groups with more men and more overconfident group members overinvest when a possibility to “beat the odds†is present, while standard situations do not allow for such pronounced effects. We explore several channels for our results, including (i) risk perception, (ii) responsibi lity allocation and (iii) spillover effects from priming and communication.

Keywords: motivated beliefs; overconfidence; gender differences; risky decisions; laboratory experiment; experimental finance (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-gen
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