Abstract

http://ssrn.com/abstract=2367230
 


 



Self-Attribution Bias in Consumer Financial Decision-Making: How Investment Returns Affect Individuals' Belief in Skill


Arvid O. I. Hoffmann


Maastricht University - School of Business and Economics - Department of Finance; Network for Studies on Pensions, Aging and Retirement (Netspar)

Thomas Post


Maastricht University - School of Business and Economics - Department of Finance; Netspar

May 23, 2014

Journal of Behavioral and Experimental Economics, Forthcoming

Abstract:     
Self-attribution bias is a long-standing concept in psychology research and refers to individuals’ tendency to attribute successes to personal skills and failures to factors beyond their control. Recently, this bias is also being studied in household finance research and is considered to underlie and reinforce investor overconfidence. To date, however, the existence of self-attribution bias amongst individual investors is not directly empirically tested. That is, it remains unclear whether good (vs. bad) returns indeed make investors believe more (vs. less) strongly that skills drive their performance. Using a unique combination of survey data and matching trading records of a sample of clients from a large discount brokerage firm, we find that: (1) the higher the returns in a previous period are, the more investors agree with a statement claiming that their recent performance accurately reflects their investment skills (and vice versa); and (2) while individual returns relate to more agreement, market returns have no such effect.

Number of Pages in PDF File: 18

Keywords: Consumer Financial Decision-Making, Household Finance, Investment Decisions, Self-Attribution Bias

JEL Classification: G11, D1, M3

Accepted Paper Series


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Date posted: December 14, 2013 ; Last revised: May 24, 2014

Suggested Citation

Hoffmann, Arvid O. I. and Post, Thomas, Self-Attribution Bias in Consumer Financial Decision-Making: How Investment Returns Affect Individuals' Belief in Skill (May 23, 2014). Journal of Behavioral and Experimental Economics, Forthcoming. Available at SSRN: http://ssrn.com/abstract=2367230 or http://dx.doi.org/10.2139/ssrn.2367230

Contact Information

Arvid O. I. Hoffmann (Contact Author)
Maastricht University - School of Business and Economics - Department of Finance ( email )
P.O. Box 616
NL- 6200 MD Maastricht
Netherlands
+31 (0) 6 18685678 (Phone)
HOME PAGE: http://www.arvidhoffmann.com
Network for Studies on Pensions, Aging and Retirement (Netspar)
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
Thomas Post
Maastricht University - School of Business and Economics - Department of Finance ( email )
Tongersestraat 53
Maastricht, 6200 MD
Netherlands
+31 43 38 83899 (Phone)
+31 43 38 84875 (Fax)
HOME PAGE: http://www.thomas-post.com
Netspar ( email )
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
HOME PAGE: http://www.netspar.nl
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