Abstract
A positive relation between confidence and effort/investment provision has been
theoretically justified and practically assumed in the literature, but has not been
thoroughly investigated. We test and confirm this positive relation between direct
measures of confidence and choice of effort or investment. More precisely, strong
overconfidence results in excess investment of effort and money, underconfidence
induces insufficient effort provision and underinvestment, and moderate
overconfidence leads to accurate decisions. Our experimental results can be
generalized as they are based on different subject pools (financial professionals and
students), media (computer-, paper-, and web-based), and types of effort (real
mental effort and monetary effort, i.e. investment).
theoretically justified and practically assumed in the literature, but has not been
thoroughly investigated. We test and confirm this positive relation between direct
measures of confidence and choice of effort or investment. More precisely, strong
overconfidence results in excess investment of effort and money, underconfidence
induces insufficient effort provision and underinvestment, and moderate
overconfidence leads to accurate decisions. Our experimental results can be
generalized as they are based on different subject pools (financial professionals and
students), media (computer-, paper-, and web-based), and types of effort (real
mental effort and monetary effort, i.e. investment).
| Original language | English |
|---|---|
| Place of Publication | Tilburg |
| Publisher | Finance |
| Number of pages | 39 |
| Volume | 2014-039 |
| Publication status | Published - 23 Jun 2014 |
Publication series
| Name | CentER Discussion Paper |
|---|---|
| Volume | 2014-039 |
Keywords
- Self-confidence
- Overconfidence
- Judgmental Bias
- Overinvestment
- Investment Choice
- Effort