Overconfidence, risk aversion and individual financial decisions in experimental asset markets

Abstract

Prior experiments revealed that investors' overconfidence can result in excessive trade and negative wealth effects. However, in most of these studies, informational asymmetries were part of the experimental design, and therefore no clear conclusion on whether the obtained results were driven by overconfidence or informational asymmetries could be made. The article addresses this issue by analysing individual financial decisions based on the study of Michailova and Schmidt, who ran an asset markets experiment with no informational asymmetries. Additionally, the study controls for differences in individual risk aversion. The data revealed that, in this setting, individual trading activity and performance were influenced by overconfidence only for female participants. Mistakes in future price forecasting, which were negatively correlated with overconfidence, partially accounted for this result. Risk aversion was uncorrelated with overconfidence and had no influence on experimental outcomes.

Sustainable economic growth and innovative development of educational systems

“…Educational policies and lifelong learning are very crucial concepts both for the young and old actors engaged in this process: in fact, both categories might be influenced by it and both can profit from acquiring new skills and knowledge that might prove to be crucial for securing and maintaining their position on the turbulent labor market (Arokiasamy, 2017;Čábelková et al, 2015;Figurska, 2017;Giedraitis et al, 2017;Gulicheva & Osipova, 2017;Koudelková & Svobodová, 2014;Oganisjana et al, 2017;Nguyen et al 2017;Michailova et al, 2017;Luhn et al, 2017;Šafránková & Šikýř, 2016;Strakova, 2015;Sokół, Ignatjeva et al;Voogt et al, 2013;). New technologies that are starting to emerge and dominate the world markets require constantly adapting and enhancing one's skills and qualifications Chmielewska & Horváthová 2016;Ehrenberger et al, 2015;Grenčiková et al, 2017;Hilkevics & Hilkevica, 2017, Lisin et al, 2017Radwan & Sakr, 2017;Mačerinskienė & Aleknavičiūtė, 2017;Shpak et al, 2017;Strielkowski, 2017;Żelazny & Pietrucha, 2017;Zemlickiene et al, 2017).…”

The Impact of a Recent Natural Disaster on the Japanese Financial Markets: Empirical Evidence

“…The question of what moves markets have been debated for ages (Mentel et al, 2016;Zemlickiene et al 2017;Michailova et al, 2017;Masood et al, 2017;Peker et al 2017;Ahmed et al 2018;Abbas, 2018;Jankelová et al, 2018;Fernández et al, 2018;Veselovsky et al, 2018). The main issue is that the movement in the markets is a result of the pricing of information, the efficient market hypothesis advocated by Malkiel (1962) and Fama (1965), or the reaction of the market participants to the information, behavioural finance theory advocated by Statman (2008) and Subrahmanyam (2007) amongst others.…”

Peculiarities of Income Distribution in Selected Countries

“…Sustainable development of regions depends on a wide array of intertwined factors, which are widely discussed in scientific literature (e.g., Lavrinenko et al, 2016;BartkowiakBakun, 2017;Simionescu, 2016;Zemlickiene et al, 2017;Michailova et al, 2017;Kendiukhov, Tvaronavičienė, 2017;Furková & Chocholatá, 2017;Ilysheva et al, 2017). Among a variety of such factors well-functioning business plays an important role.…”