Download or read book Three Essays on the Effect of Overconfidence on Economic Decision Making written by Klajdi Bregu and published by . This book was released on 2017 with total page 344 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation uses experimental evidence to explore the effects of overconfidence on economic decision making. In Chapter 1 I provide experimental evidence of the effects of alcohol on overconfidence and several other important tasks. I also explore the relationship between overconfidence and the behavior in the other tasks. The data from this experiment show that an alcohol level of 0.08 does not have a systemic effect on behavior and more importantly it does not affect one's level of overconfidence. I also show that overconfidence is not significantly correlated with risk preferences, math, strategic behavior, anchoring, altruism, and food choices. In Chapter 2 I use feedback to establish a causal link between overconfidence and trading behavior. Feedback is used to eliminate the possibility for subjects to be overconfident about the accuracy of their signals. The data from this experiment show that overconfidence affects trading volume and profits, but when feedback is provided trading volume is no longer affected by overconfidence. This shows that there exists a causal relationship between overconfidence and trading volume. Lastly, Chapter 3 explores the role of overconfidence on insurance purchasing decisions. I show that overconfident people buy significantly less insurance. The stability of overconfidence using different measures and the relationship between overconfidence and risk is also explored. I find that different tasks do not elicit the same level of overconfidence and that risk preferences and overconfidence are not statistically significantly correlated.
Download or read book Three Essays on Investor Confidence written by Christoph Meier and published by . This book was released on 2017 with total page 152 pages. Available in PDF, EPUB and Kindle. Book excerpt: This PhD research is committed to contributing to the literature on investor overconfidence, one of the most robust findings in the field of behavioural finance. Overconfidence, a cognitive bias where decision makers tend to be overly optimistic not only about their aptitudes and skills, but also about the precision of their forecasts and information, is associated with poor decision making. Individuals suffering from overconfidence tend to be excessive stock traders, Chief Executive Officers (CEOs) who rush into mergers and acquisitions, risky drivers, naïve entrepreneurs and sloppy retirement planners. The literature yields the many attempts to link stock market phenomena to overconfidence. However, existing measures that have been used to test these hypotheses are typically only loosely related to the overconfidence of investors in their own abilities, or use proxies that lack a formal model of cognitive psychology. In the first of three research projects, I propose a measure of aggregate investor confidence that is based on a cross-disciplinary model containing determinants of confidence. The measure captures major economic events intuitively, and is statistically distinct from exiting proxies. Using a 1926-2011United States (US) sample, I find that the new measure is a better predictor of aggregate trading activity than past stock returns, which have been used in prior studies.The second research project explores the role of aggregate investor confidence in asset pricing factors. Empirical tests reveal interesting patterns. Firstly, and in line with a behavioural model by Daniel, Hirshleifer, and Subrahmanyam (1998), aggregate investor confidence partially explains variations in the profitability of momentum strategies. Additionally, aggregate investor confidence appears to play a key role in the size factor, complementing an early hypothesis by Roll (1981). Indeed, investors seem to systematically change their risk perceptions which ultimately impacts on market outcome. The third research project takes a qualitative stance. Using a new methodology proposed by Glaser, Langer, and Weber (2013), we utilise the ability to assess time series variations of individual overconfidence levels in an experimental asset market. We find that arriving signals that strongly support prior decisions cause overconfidence to prevail, while strongly opposing signals cause the effect to vanish 'overconfidence crashes'. However, previously lost overconfidence can re-emerge when these opposing signals reverse .Additionally, we find strong evidence in favour of the hypothesis by Hongaund Stein (2007) which states that investors interpret arriving information differently with opposing feedback having particularly strong effects. We also find measurement bias in the methodology proposed by Glaser et al. (2013). This is consistent with methodological concerns documented by Langnickeland Zeisberger (2016) and Biais, Hilton, Mazurier, and Pouget (2005) who report that assessment tasks using confidence intervals typically yield inflated overconfidence scores, as individuals tend to be insensitive to confidence levels in their estimations.
Download or read book Handbook of Research on Behavioral Finance and Investment Strategies Decision Making in the Financial Industry written by Copur, Zeynep and published by IGI Global. This book was released on 2015-01-31 with total page 559 pages. Available in PDF, EPUB and Kindle. Book excerpt: In an ever-changing economy, market specialists strive to find new ways to evaluate the risks and potential reward of economic ventures by assessing the importance of human reaction during the economic planning process. The Handbook of Research on Behavioral Finance and Investment Strategies: Decision Making in the Financial Industry presents an interdisciplinary, comparative, and competitive analysis of the thought processes and planning necessary for individual and corporate economic management. This publication is an essential reference source for professionals, practitioners, and managers working in the field of finance, as well as researchers and academicians interested in an interdisciplinary approach to combine financial management, sociology, and psychology.
Download or read book The Psychology of Economic Decisions written by Isabelle Brocas and published by Oxford University Press, USA. This book was released on 2003 with total page 259 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume brings together contributions to the burgeoning research area of behavioral economics from a number of well-known international scholars in the field. Topics covered include 'irrational' conducts; imperfect self-knowledge; imperfect memory; time and utility; and experimental practices in psychology, economics, and finance. This book will provide a point of entry to anyone wishing to discover what the intellectual terrain between economics and psychology looks like.
Download or read book American Doctoral Dissertations written by and published by . This book was released on 1993 with total page 704 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Beyond Greed and Fear written by Hersh Shefrin and published by . This book was released on 2002 with total page 410 pages. Available in PDF, EPUB and Kindle. Book excerpt: Even the best Wall Street investors make mistakes. No matter how savvy or experienced, all financial practitioners eventually let bias, overconfidence, and emotion cloud their judgement and misguide their actions. Yet most financial decision-making models fail to factor in these fundamentals of human nature. In Beyond Greed and Fear, the most authoritative guide to what really influences the decision-making process, Hersh Shefrin uses the latest psychological research to help us understand the human behavior that guides stock selection, financial services, and corporate financial strategy. Shefrin argues that financial practitioners must acknowledge and understand behavioral finance--the application of psychology to financial behavior--in order to avoid many of the investment pitfalls caused by human error. Through colorful, often humorous real-world examples, Shefrin points out the common but costly mistakes that money managers, security analysts, financial planners, investment bankers, and corporate leaders make, so that readers gain valuable insights into their own financial decisions and those of their employees, asset managers, and advisors. According to Shefrin, the financial community ignores the psychology of investing at its own peril. Beyond Greed and Fear illuminates behavioral finance for today's investor. It will help practitioners to recognize--and avoid--bias and errors in their decisions, and to modify and improve their overall investment strategies.
Download or read book Dissertation Abstracts International written by and published by . This book was released on 2009 with total page 640 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Thinking Fast and Slow written by Daniel Kahneman and published by Farrar, Straus and Giroux. This book was released on 2011-10-25 with total page 511 pages. Available in PDF, EPUB and Kindle. Book excerpt: Major New York Times bestseller Winner of the National Academy of Sciences Best Book Award in 2012 Selected by the New York Times Book Review as one of the ten best books of 2011 A Globe and Mail Best Books of the Year 2011 Title One of The Economist's 2011 Books of the Year One of The Wall Street Journal's Best Nonfiction Books of the Year 2011 2013 Presidential Medal of Freedom Recipient Kahneman's work with Amos Tversky is the subject of Michael Lewis's The Undoing Project: A Friendship That Changed Our Minds In his mega bestseller, Thinking, Fast and Slow, Daniel Kahneman, the renowned psychologist and winner of the Nobel Prize in Economics, takes us on a groundbreaking tour of the mind and explains the two systems that drive the way we think. System 1 is fast, intuitive, and emotional; System 2 is slower, more deliberative, and more logical. The impact of overconfidence on corporate strategies, the difficulties of predicting what will make us happy in the future, the profound effect of cognitive biases on everything from playing the stock market to planning our next vacation—each of these can be understood only by knowing how the two systems shape our judgments and decisions. Engaging the reader in a lively conversation about how we think, Kahneman reveals where we can and cannot trust our intuitions and how we can tap into the benefits of slow thinking. He offers practical and enlightening insights into how choices are made in both our business and our personal lives—and how we can use different techniques to guard against the mental glitches that often get us into trouble. Winner of the National Academy of Sciences Best Book Award and the Los Angeles Times Book Prize and selected by The New York Times Book Review as one of the ten best books of 2011, Thinking, Fast and Slow is destined to be a classic.
Download or read book A Tale of Two Crises written by Seetharam Kallidaikurichi and published by Routledge. This book was released on 2013-03-05 with total page 145 pages. Available in PDF, EPUB and Kindle. Book excerpt: Some analysts looked at the 1997/98 East Asian crisis not as one crisis but as a combination of crises, beginning with a crisis of confidence and evolving into a currency crisis, a financial crisis, an economic crisis, a social crisis and a political crisis. This book is a multidisciplinary study of financial crises, in particular, the Asian crisis of 1997 and the more recent global financial crisis of 2008. Looking at financial crises not as one crisis, but as a combination of crises beginning with a crisis of confidence, this study steps out of the traditional mould and examines financial crises from novel perspectives. The book highlights that since the origin of a financial crisis is a confidence crisis, either in the whole economy or a particular sector, the Asian and recent global crises could have backward and forward linkages to political regimes and institutions, culture and tradition, the role of the media, society and societal evolution and development processes of regulatory regimes. Through contributions by authors in fields ranging from sociology and political science, media and Islamic banking, to law and regulation, this study adopts a broad framework for understanding financial crises, and sheds light on the interwoven and complex structures and often overlooked aspects which contribute to the holistic understanding of this topic.
Download or read book Overconfidence and War written by Dominic D. P. Johnson and published by Harvard University Press. This book was released on 2009-07-01 with total page 289 pages. Available in PDF, EPUB and Kindle. Book excerpt: Opponents rarely go to war without thinking they can win--and clearly, one side must be wrong. This conundrum lies at the heart of the so-called "war puzzle": rational states should agree on their differences in power and thus not fight. But as Dominic Johnson argues in Overconfidence and War, states are no more rational than people, who are susceptible to exaggerated ideas of their own virtue, of their ability to control events, and of the future. By looking at this bias--called "positive illusions"--as it figures in evolutionary biology, psychology, and the politics of international conflict, this book offers compelling insights into why states wage war. Johnson traces the effects of positive illusions on four turning points in twentieth-century history: two that erupted into war (World War I and Vietnam); and two that did not (the Munich crisis and the Cuban missile crisis). Examining the two wars, he shows how positive illusions have filtered into politics, causing leaders to overestimate themselves and underestimate their adversaries--and to resort to violence to settle a conflict against unreasonable odds. In the Munich and Cuban missile crises, he shows how lessening positive illusions may allow leaders to pursue peaceful solutions. The human tendency toward overconfidence may have been favored by natural selection throughout our evolutionary history because of the advantages it conferred--heightening combat performance or improving one's ability to bluff an opponent. And yet, as this book suggests--and as the recent conflict in Iraq bears out--in the modern world the consequences of this evolutionary legacy are potentially deadly.
Download or read book The Foundations of Behavioral Economic Analysis written by Sanjit Dhami and published by Oxford University Press, USA. This book was released on 2020-01-02 with total page 354 pages. Available in PDF, EPUB and Kindle. Book excerpt: This fifth volume of The Foundations of Behavioral Economic Analysis covers behavioral models of learning. It is an essential guide for advanced undergraduate and postgraduate students seeking a concise and focused text on this important subject, and examines heuristics and biases in judgment and decision making, mental accounting, and behavioral finance and bounded rationality. This updated extract from Dhami's leading textbook allows the reader to pursue subsections of this vast and rapidly growing field and to tailor their reading to their specific interests in behavioral economics.
Download or read book The Self in Social Judgment written by Mark D. Alicke and published by Psychology Press. This book was released on 2013-05-13 with total page 361 pages. Available in PDF, EPUB and Kindle. Book excerpt: The volume begins with a historical overview of the self in social judgment and outlines the major issues. Subsequent chapters, all written by leading experts in their respective areas, identify and elaborate four major themes regarding the self in social judgment: · the role of the self as an information source for evaluating others, or what has been called 'social projection' · the assumption of personal superiority as reflected in the pervasive tendency for people to view their characteristics more favorably than those of others · the role of the self as a comparison standard from or toward which other people's behaviors and attributes are assimilated or contrasted · the relative weight people place on the individual and collective selves in defining their attributes and comparing them to those of other people
Download or read book Essays on the Psychology of Competition written by Dan Phillip Lovallo and published by . This book was released on 1996 with total page 230 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Capital Budgeting Valuation written by H. Kent Baker and published by John Wiley & Sons. This book was released on 2011-05-04 with total page 533 pages. Available in PDF, EPUB and Kindle. Book excerpt: An essential guide to valuation techniques and financial analysis With the collapse of the economy and financial systems, many institutions are reevaluating what they are willing to spend money on. Project valuation is key to both cost effectiveness measures and shareholder value. The purpose of this book is to provide a comprehensive examination of critical capital budgeting topics. Coverage extends from discussing basic concepts, principles, and techniques to their application to increasingly complex, real-world situations. Throughout, the book emphasizes how financially sound capital budgeting facilitates the process of value creation and discusses why various theories make sense and how firms can use them to solve problems and create wealth. Offers a strategic focus on the application of various techniques and approaches related to a firm's overall strategy Provides coverage of international topics based on the premise that managers should view business from a global perspective Emphasizes the importance of using real options Comprised of contributed chapters from both experienced professionals and academics, Capital Budgeting Valuation offers a variety of perspectives and a rich interplay of ideas related to this important financial discipline.
Download or read book Innovation Organization and Economic Dynamics written by Giovanni Dosi and published by Edward Elgar Publishing. This book was released on 2000-01-01 with total page 728 pages. Available in PDF, EPUB and Kindle. Book excerpt: Conventional economic analysis of property rights in natural resources is too narrow and restrictive to allow for effective comparisons between alternative institutional structures. In this book, a conceptual framework is developed for the analysis of the
Download or read book Ethics and Deviations in Decision making written by Gagari Chakrabarti and published by Springer Nature. This book was released on 2019-11-20 with total page 310 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book explores how the ethically inconsistent behaviour in workplaces can be rooted in moral fibers of the decision-makers, and/or in their varying moral foci depending on the philosophical cornerstones, on which those rest. It explores further whether such decisions may be shaped or modified by contextual factors leading, possibly, to bounded ethicality. Based on a primary survey approaching the academicians, administrators, and other service-holders from India and abroad, it analyses the problem, its determinants and variations across socio-economic and demographic factors.
Download or read book Conspicuous Employment written by Benjamin Berghaus and published by Springer Nature. This book was released on 2020-01-20 with total page 264 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book illustrates the foundations of status research from the perspective of recruiting. The ever-increasing competitive pressure on both sides of the market has led to the growing significance of prestige in employment as an efficient yardstick of performance. At the same time, mounting student loans make the need for a prestigious education palpable. While prestige has always been important in the job market, continuously increasing competitive pressure is driving the role of prestige to new heights. This book shows how insights from consumer research on prestige-driven behavior can be helpful in gaining a better understanding of applicants' motives. Furthermore, it investigates the effect of prestige preference versus value-based, person-organization fit. Lastly, the book reports on experimental evidence that prestigious employer preference can provide a basis for risky decision-making behavior. Prestige is an increasingly powerful motivator in today’s job market – one that requires a closer look.
