Overconfident investors and probability misjudgments

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• 作者：Doron Kliger ; Ori Levy
• 关键词：Market data ; Overconfidence ; Probability weighting functions
• 刊名：The Journal of Socioeconomics
• 出版年：2010
• 出版时间：January 2010
• 年：2010
• 卷：39
• 期：1
• 页码：24-29
• 全文大小：614 K

文摘

This paper explores systematic distortions of subjective probabilities by overconfident investors. In agreement with many non-expected utility theories, our devised setup acknowledges nonlinear weighting of physical probabilities by both rational and overconfident investors. Overconfidence – assumed to be higher after a history of gains and lower after a history of losses – changes these probability transformations. Using US asset price data, overconfident investors are found to be more optimistic than rational investors about future prospects.