An Experimental Test of the Impact of Overconfidence and Gender on Trading Activity

Posted: 18 Aug 2009

See all articles by Richard Deaves

Richard Deaves

McMaster University - Michael G. DeGroote School of Business; Center for European Economic Research (ZEW)

Erik Lüders

affiliation not provided to SSRN

Guo Ying Luo

McMaster University

Multiple version iconThere are 2 versions of this paper

Date Written: July 2009

Abstract

We perform an asset market experiment in order to investigate whether overconfidence induces trading. We investigate three manifestations of overconfidence: calibration-based overconfidence, the better-than-average effect and illusion of control. Novelly, the measure employed for calibration-based overconfidence is task-specific in that it is designed to influence behavior. We find that calibration-based overconfidence does engender additional trade, though the better-than-average also appears to play a role. This is true both at the level of the individual and also at the level of the market. There is little evidence that gender influences trading activity.

JEL Classification: G10, G11, G12, G14

Suggested Citation

Deaves, Richard and Lüders, Erik and Luo, Guo Ying, An Experimental Test of the Impact of Overconfidence and Gender on Trading Activity (July 2009). Review of Finance, Vol. 13, Issue 3, pp. 555-575, 2009. Available at SSRN: https://ssrn.com/abstract=1456786 or http://dx.doi.org/10.1093/rof/rfn023

Richard Deaves

McMaster University - Michael G. DeGroote School of Business ( email )

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada
905-522-3976 (Phone)

Center for European Economic Research (ZEW)

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

Erik Lüders

affiliation not provided to SSRN

No Address Available

Guo Ying Luo

McMaster University

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada
905 525 9140 ext. 23983 (Phone)

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