The Dynamics of Overconfidence: Evidence from Stock Market Forecasters

25 Pages Posted: 9 Dec 2005 Last revised: 20 Aug 2008

See all articles by Richard Deaves

Richard Deaves

McMaster University - Michael G. DeGroote School of Business

Erik Lueders

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

Michael Schröder

ZEW – Leibniz Centre for European Economic Research - International Finance and Financial Management

Date Written: November 2005

Abstract

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

Suggested Citation

Deaves, Richard and Lueders, Erik and Schröder, Michael, The Dynamics of Overconfidence: Evidence from Stock Market Forecasters (November 2005). ZEW - Centre for European Economic Research Discussion Paper No. 05-083, Available at SSRN: https://ssrn.com/abstract=868970 or http://dx.doi.org/10.2139/ssrn.868970

Richard Deaves

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

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada
905-522-3976 (Phone)

Erik Lueders

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

Michael Schröder (Contact Author)

ZEW – Leibniz Centre for European Economic Research - International Finance and Financial Management ( email )

L 7,1
P.O. Box 10 34 43
D-68034 Mannheim
Germany
+49 621 1235 368 (Phone)
+49 621 1235 223 (Fax)

HOME PAGE: http://www.zew.de/en/team/msc/?cHash=c9507802336d8f7db96848c539ed2f89

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