Self-Confidence, Overconfidence and Prenatal Testosterone Exposure: Evidence from the Lab

CentER Discussion Paper Series No. 2014-014

22 Pages Posted: 19 Feb 2014

See all articles by Patricio S. Dalton

Patricio S. Dalton

Tilburg University - Center for Economic Research (CentER)

Sayantan Ghosal

University of Glasgow - Adam Smith Business School

Date Written: February 14, 2014

Abstract

This paper examines whether the degree of confidence and overconfidence in one's ability is determined biologically. In particular, we study whether fetal testosterone exposure correlates with an incentive-compatible measure of confidence within an experimental setting. We find that men (rather than women) who were exposed to high testosterone levels in their mother's womb are less likely to overestimate their actual performance, which in turn helps them to gain higher monetary rewards. Men exposed to low prenatal testosterone levels, instead, set unrealistically high expectations which results in self-defeating behavior. These results from the lab are able to reconcile hitherto disconnected evidence from the field, by providing a link between traders' overconfidence bias, long-term financial returns and prenatal testosterone exposure.

Keywords: 2D:4D, testosterone, neuroeconomics, expectations, overconfidence, self-confidence, goals

JEL Classification: C91, D03, D87

Suggested Citation

Dalton, Patricio S. and Ghosal, Sayantan, Self-Confidence, Overconfidence and Prenatal Testosterone Exposure: Evidence from the Lab (February 14, 2014). CentER Discussion Paper Series No. 2014-014. Available at SSRN: https://ssrn.com/abstract=2397675 or http://dx.doi.org/10.2139/ssrn.2397675

Patricio S. Dalton (Contact Author)

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Sayantan Ghosal

University of Glasgow - Adam Smith Business School ( email )

Glasgow, Scotland
United Kingdom

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