Economics, Econometrics and Finance
4 years ago

Market forecasters' overconfidence worsens with experience, leading to miscalibrated predictions.

Journal of Economic Behavior & Organization
The dynamics of overconfidence: Evidence from stock market forecasters
Richard Deaves, Erik Lüders, Michael Schröder

Paper Summary

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Market forecasters tend to be overly confident and make mistakes in their predictions. They do learn from their errors by adjusting their confidence levels, but this learning process is not perfect. The more experience they have, the more overconfident they become due to a decline in their knowledge.