Academy of Financial Services
This study examines the impact of shared decision-making and gender on investor overconfidence. It analyzes data from 2,000 investors, 6,394 consumers, and 240 experimental subjects to answer the question whether investors who share the decision-making responsibility are less affected by the overconfidence bias than those who decide on their own. Similarly, it assesses whether investor overconfidence remains a male-driven phenomenon after controlling for shared decision-making. The results from a set of Bayesian regression analyses and Bayesian structural models suggest that people who share financial decisions are substantially less affected by investor overconfidence. However, sharing with family members and friends seems to be more effective in reducing the bias than sharing with a professional advisor. In addition, the data suggest that the only traceable gender effect is that females are much more affected by overconfidence than men. This study provides investors and professional advisors with a feasible tool to decrease overconfidence.
Author(s): Dominik M. Piehlmaier