Overconfidence, Effort, and Investment (Replaced by CentER DP 2014-039)

E.S. Pikulina, L.D.R. Renneboog, J.R. Ter Horst, P.N. Tobler

Research output: Working paperDiscussion paperOther research output


Abstract: The theoretical finance literature predicts that overconfident managers overinvest in risky projects and exert more effort to learn about potentially value-enhancing projects in comparison with their unbiased peers. We test this prediction experimentally. We demonstrate that strong overconfidence results in overinvestment and excess effort levels, moderate overconfidence leads to accurate decisions, and underconfidence induces underinvestment and insufficient effort. Our results can be generalized as they are based on different subject types (financial professionals and students), various media (computer-, paper-, and web-based designs), and different types of effort costs (real effort and monetary investment costs).
Original languageEnglish
Place of PublicationTilburg
Number of pages52
Publication statusPublished - 2013

Publication series

NameCentER Discussion Paper


  • Self-confidence
  • Overconfidence
  • Judgmental Bias
  • Better-than-Average
  • Overinvestment
  • Investment Choice
  • Effort


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