Price dynamics and trader overconfidence

Steffen Ahrens, Ciril Bosch-Rosa, Rasmus Roulund

Overconfidence is one of the most important biases in financial markets and commonly associated with excessive trading and asset market bubbles. So far, most of the finance literature takes overconfidence as a given, "static" personality trait. In this paper we introduce a novel experimental design which allows us to track different measures of overconfidence during an asset market bubble. The results show that overconfidence co-moves with asset prices and points towards a feedback loop in which overconfidence adds fuel to the flame of existing bubbles.

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Year of publication:	[2019]
Authors:	Ahrens, Steffen ; Bosch-Rosa, Ciril ; Roulund, Rasmus Pank
Publisher:	Munich, Germany : Collaborative Research Center Transregio 190
Subject:	overconfidence \| experiment \| asset markets \| Anlageverhalten \| Behavioural finance \| Experiment \| Theorie \| Theory \| Finanzmarkt \| Financial market \| Wertpapierhandel \| Securities trading \| Vertrauen \| Confidence \| Börsenkurs \| Share price \| Persönlichkeitspsychologie \| Personality psychology