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

36 Pages Posted: 18 May 2004

See all articles by Richard Deaves

Richard Deaves

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

Erik Lueders

Laval University; Centre interuniversitaire sur le risque, les politiques économiques et l'emploi (CIRPÉE)

Guo Ying Luo

Rutgers, The State University of New Jersey - Management Science & Information Systems; McMaster University - Michael G. DeGroote School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: November 21, 2003

Abstract

We perform an asset market experiment in order to test the central result coming from the new overconfidence models, namely that high levels of overconfidence lead to enhanced trading activity. We find that overconfidence does engender additional trade. Unlike previous experimental or survey-based evidence, ours is the first study to find this to be so when overconfidence is measured using a calibration-based approach that is most akin to the theoretical literature. Further, we investigate the contention that gender influences trading activity through overconfidence. There is no evidence of this, as women have about the same level of both overconfidence and trading activity as do men, and gender is not a useful explanatory variable of trading in a multivariate regression.

Suggested Citation

Deaves, Richard and Lueders, Erik and Luo, Rosemary Guo Ying, An Experimental Test of the Impact of Overconfidence and Gender on Trading Activity (November 21, 2003). AFA 2005 Philadelphia Meetings; EFMA 2004 Basel Meetings Paper. Available at SSRN: https://ssrn.com/abstract=497284 or http://dx.doi.org/10.2139/ssrn.497284

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 Lueders (Contact Author)

Laval University ( email )

Quebec G1K 7P4
Canada

Centre interuniversitaire sur le risque, les politiques économiques et l'emploi (CIRPÉE)

Ste-Foy, Quebec G1K 7P4
Canada

Rosemary Guo Ying Luo

Rutgers, The State University of New Jersey - Management Science & Information Systems ( email )

180 University Ave.
Newark, NJ 07102-1895
United States
732-445-2996 (Phone)

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

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada

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