The Dynamics of Overconfidence: Evidence from Stock Market Forecasters
25 Pages Posted: 9 Dec 2005 Last revised: 20 Aug 2008
Date Written: November 2005
As a group, market forecasters are egregiously overconfident. In conformity to the dynamic model of overconfidence of Gervais and Odean (2001), successful forecasters become more overconfident. What's more, more experienced forecasters have "learned to be overconfident," and hence are more susceptible to this behavioral flaw than their less experienced peers. It is not just individuals who are affected. Markets also become more overconfident when market returns have been high.
Keywords: Overconfidence, market forecasters
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