Exponential-Growth Bias and Long-Run Investment Decisions

Posted: 22 Jun 2012

See all articles by Joshua Tasoff

Joshua Tasoff

Claremont Colleges - Claremont Graduate University

Date Written: June 21, 2012

Abstract

Exponential-growth bias is the tendency for individuals to underestimate exponential growth due to neglecting the role of compounding. We run an online study to measure the extent of exponential-growth bias in a representative sample of the U.S. population. We measure the effects of a simple graphical intervention on the bias. We run a laboratory study on students to measure both the bias and the extent of overconfidence in answering the questions. We find both a large bias and overconfidence.

Suggested Citation

Tasoff, Joshua, Exponential-Growth Bias and Long-Run Investment Decisions (June 21, 2012). Available at SSRN: https://ssrn.com/abstract=2089084

Joshua Tasoff (Contact Author)

Claremont Colleges - Claremont Graduate University ( email )

150 E. Tenth Street
Claremont, CA 91711
United States

HOME PAGE: http://sites.cgu.edu/tasoffj/

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