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Overconfidence, position size, and the link to performance
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Forman, John and Horton, Joanne (2019) Overconfidence, position size, and the link to performance. Journal of Empirical Finance, 53 . pp. 291-309. doi:10.1016/j.jempfin.2019.08.001
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Official URL: http://dx.doi.org/10.1016/j.jempfin.2019.08.001
Abstract
The overconfidence literature employs activity metrics such as account turnover and trade frequency to link misattribution/self-attribution to excess trading. In this paper we argue relative position size is a more meaningful indicator of overconfidence. Using a sample of retail traders, we find that when traders take relatively larger positions they make more impaired trade entry/exit timing decisions. The opposite is seen when they trade more frequently. We also observe that more sophisticated and experienced traders trade relatively smaller positions and exhibit less overconfidence, consistent with these individuals suffering fewer behavioral biases, for which a likely learning effect is observed.
| Item Type: | Journal Article | ||||||||
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| Subjects: | H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HF Commerce |
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| Divisions: | Faculty of Social Sciences > Warwick Business School > Accounting Faculty of Social Sciences > Warwick Business School |
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| Library of Congress Subject Headings (LCSH): | Confidence -- Economic aspects, Decision making, Retail trade, Performance, Turnover (Business) | ||||||||
| Journal or Publication Title: | Journal of Empirical Finance | ||||||||
| Publisher: | Elsevier | ||||||||
| ISSN: | 0927-5398 | ||||||||
| Official Date: | September 2019 | ||||||||
| Dates: |
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| Date of first compliant deposit: | 21 August 2019 | ||||||||
| Volume: | 53 | ||||||||
| Page Range: | pp. 291-309 | ||||||||
| DOI: | 10.1016/j.jempfin.2019.08.001 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Access rights to Published version: | Restricted or Subscription Access |
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