Financial Professionals' Overconfidence: Is it Experience, Function, or Attitude?

34 Pages Posted: 15 Mar 2014

See all articles by Oliver Gloede

Oliver Gloede

Swiss National Bank

Lukas Menkhoff

German Institute for Economic Research (DIW Berlin); Humboldt University of Berlin - Faculty of Economics

Date Written: March 2014

Abstract

This paper examines financial professionals’ overconfidence in their forecasting performance. We compare individuals’ self‐rating of performance with the true performance, both measured relative to the same peer group. The forecasters in our sample show overconfidence on average, although to a moderate degree, including many cases of underconfidence. In analysing this, we find that working experience is accompanied by less overconfidence. Function is also related to less overconfidence, such as being a fund manager and using fundamental analysis. The same effect is found for the attitude to herd, whereas recent success appears with more overconfident professionals.

Keywords: better‐than‐average, self‐rating, forecasting, foreign exchange, performance

Suggested Citation

Gloede, Oliver and Menkhoff, Lukas, Financial Professionals' Overconfidence: Is it Experience, Function, or Attitude? (March 2014). European Financial Management, Vol. 20, Issue 2, pp. 236-269, 2014. Available at SSRN: https://ssrn.com/abstract=2409357 or http://dx.doi.org/10.1111/j.1468-036X.2011.00636.x

Oliver Gloede (Contact Author)

Swiss National Bank ( email )

Börsenstrasse 15
Zürich, 8001
Switzerland

Lukas Menkhoff

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Humboldt University of Berlin - Faculty of Economics ( email )

Spandauer Strasse 1
Berlin
Germany

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