Overconfidence of Professionals and Lay Men : Individual Differences Within and Between Tasks?


Glaser, Markus ; Langer, Thomas ; Weber, Martin


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URL: http://ub-madoc.bib.uni-mannheim.de/2285
URN: urn:nbn:de:bsz:180-madoc-22857
Document Type: Working paper
Year of publication: 2005
Publication language: English
Institution: Business School > Sonstige - Fakultät für Betriebswirtschaftslehre
MADOC publication series: Lehrstuhl für ABWL, Finanzwirtschaft, insb. Bankbetriebslehre (Weber) > Working Papers
Subject: 330 Economics
Classification: JEL: C9 G1 ,
Subject headings (SWD): Deutschland , Anlageverhalten , Entscheidung bei Unsicherheit , Kognition , Theorie
Keywords (English): Overconfidence , Judgment Biases , Individual Differences , Expert Judgment
Abstract: Overconfidence can manifest itself in various forms. For example, people think that their knowledge is more precise than it really is (miscalibration) and they believe that their abilities are above average (better than average effect). The questions whether judgment biases are related or whether stable individual differences in the degree of overconfidence exist, have long been unexplored. In this paper, we present two studies that analyze whether professional traders or investment bankers who work for international banks are prone to judgment biases to the same degree as a population of lay men. We examine whether there are robust individual differences in the degree of overconfidence within various tasks. Furthermore, we analyze whether the degree of judgment biases is correlated across tasks. Based on the answers of 123 professionals, we find that expert judgment is biased. In most tasks, their degrees of overconfidence are significantly higher than the respective scores of a student control group. In line with the literature, we find stable individual differences within tasks (e.g. in the degree of miscalibration). However, we find that correlations across distinct tasks are sometimes insignificant or even negative. We conclude that some manifestations of overconfidence, that are often argued to be related, are actually unrelated.
Additional information: Available at SSRN: http://ssrn.com/abstract

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Glaser, Markus ; Langer, Thomas ; Weber, Martin (2005) Overconfidence of Professionals and Lay Men : Individual Differences Within and Between Tasks? Open Access [Working paper]
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