Overconfidence in judgements: the evidence, the implications and the limitations
Overconfidence in judgements: the evidence, the implications and the limitations
This paper examines the degree to which individuals tend to be overconfident in their judgements and identifies the implications for those trading in prediction markets. The findings from laboratory-based psychological studies of overconfidence are compared and contrasted with those from financial market studies. The broad conclusion from this literature survey is that overconfidence is a widespread
phenomenon which is influenced by a number of factors, such as, the difficulty of the judgement task, the amount and nature of outcome feedback, and the gender and culture of the decision maker. It is also clear that there are a number of limitations of the existing research and a suggested methodology for further research in this area is examined.
Overconfidence, heuristics, biases, financial market, predictions
73-90
Wu, Shih-Wei
9dcbf5fa-fbda-4689-8557-36446ec01e45
Johnson, Johnnie E.V.
6d9f1a51-38a8-4011-a792-bfc82040fac4
Sung, M.
2114f823-bc7f-4306-a775-67aee413aa03
May 2008
Wu, Shih-Wei
9dcbf5fa-fbda-4689-8557-36446ec01e45
Johnson, Johnnie E.V.
6d9f1a51-38a8-4011-a792-bfc82040fac4
Sung, M.
2114f823-bc7f-4306-a775-67aee413aa03
Wu, Shih-Wei, Johnson, Johnnie E.V. and Sung, M.
(2008)
Overconfidence in judgements: the evidence, the implications and the limitations.
Journal of Prediction Markets, 2 (1), .
Abstract
This paper examines the degree to which individuals tend to be overconfident in their judgements and identifies the implications for those trading in prediction markets. The findings from laboratory-based psychological studies of overconfidence are compared and contrasted with those from financial market studies. The broad conclusion from this literature survey is that overconfidence is a widespread
phenomenon which is influenced by a number of factors, such as, the difficulty of the judgement task, the amount and nature of outcome feedback, and the gender and culture of the decision maker. It is also clear that there are a number of limitations of the existing research and a suggested methodology for further research in this area is examined.
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Published date: May 2008
Keywords:
Overconfidence, heuristics, biases, financial market, predictions
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Local EPrints ID: 151629
URI: http://eprints.soton.ac.uk/id/eprint/151629
ISSN: 1750-6751
PURE UUID: a5775a9c-de42-45e3-b4fc-6d5fe46bd32c
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Date deposited: 12 May 2010 07:51
Last modified: 14 Mar 2024 02:49
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Contributors
Author:
Shih-Wei Wu
Author:
Johnnie E.V. Johnson
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