Scale dependence of overconfidence in stock market volatility forecasts


Glaser, Markus ; Langer, Thomas ; Reynders, Jens ; Weber, Martin


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URL: http://ub-madoc.bib.uni-mannheim.de/2312
URN: urn:nbn:de:bsz:180-madoc-23122
Document Type: Working paper
Year of publication: 2008
Publication language: English
Institution: School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series: Sonderforschungsbereich 504 > Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung (Laufzeit 1997 - 2008)
Subject: 330 Economics
Classification: JEL: G1 C9 ,
Subject headings (SWD): Preisänderung , Prognose , Konjunkturprognose , Konfidenzintervall , Privater Anleger , Vertrauen
Keywords (English): Volatility forecast , confidence interval , individual investor , overconfidence
Abstract: In this study, we analyze whether volatility forecasts (judgmental confidence intervals) are influenced by the specific elicitation mode (i.e. whether forecasters have to state future price levels or directly future returns as upper and lower bounds). We present questionnaire responses of about 250 students from two German universities. Participants were asked to state median forecasts as well as confidence intervals for seven stock market time series. Using a between subject design, one half of the subjects was asked to state future price levels, the other group was directly asked for returns. Consistent with prior research we find that subjects underestimate the volatility of stock returns, indicating overconfidence. As a new insight, we find that the strength of the overconfidence effect in stock market forecasts is highly significantly affected by the fact whether subjects provide price or return forecasts. Volatility estimates are lower (and the overconfidence bias is thus stronger) when subjects are asked for returns compared to price forecasts.
Additional information: Available at SSRN: http://ssrn.com/abstract

Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




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Glaser, Markus ; Langer, Thomas ; Reynders, Jens ; Weber, Martin (2008) Scale dependence of overconfidence in stock market volatility forecasts. Open Access [Working paper]
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