Learning to be overconfident
Publication
, Journal Article
Gervais, S; Odean, T
Published in: Review of Financial Studies
January 1, 2001
We develop a multiperiod market model describing both the process by which traders learn about their ability and how a bias in this learning can create overconfident traders. A trader in our model initially does not know his own ability. He infers this ability from his successes and failures. In assessing his ability the trader takes too much credit for his successes. This leads him to become overconfident. A trader's expected level of overconfidence increases in the early stages of his career. Then, with more experience, he comes to better recognize his own ability. The patterns in trading volume, expected profits, price volatility, and expected prices resulting from this endogenous overconfidence are analyzed.
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Published In
Review of Financial Studies
DOI
ISSN
0893-9454
Publication Date
January 1, 2001
Volume
14
Issue
1
Start / End Page
1 / 27
Related Subject Headings
- Finance
- 3801 Applied economics
- 3502 Banking, finance and investment
- 1502 Banking, Finance and Investment
- 1402 Applied Economics
- 1401 Economic Theory
Citation
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Gervais, S., & Odean, T. (2001). Learning to be overconfident. Review of Financial Studies, 14(1), 1–27. https://doi.org/10.1093/rfs/14.1.1
Gervais, S., and T. Odean. “Learning to be overconfident.” Review of Financial Studies 14, no. 1 (January 1, 2001): 1–27. https://doi.org/10.1093/rfs/14.1.1.
Gervais S, Odean T. Learning to be overconfident. Review of Financial Studies. 2001 Jan 1;14(1):1–27.
Gervais, S., and T. Odean. “Learning to be overconfident.” Review of Financial Studies, vol. 14, no. 1, Jan. 2001, pp. 1–27. Scopus, doi:10.1093/rfs/14.1.1.
Gervais S, Odean T. Learning to be overconfident. Review of Financial Studies. 2001 Jan 1;14(1):1–27.
Published In
Review of Financial Studies
DOI
ISSN
0893-9454
Publication Date
January 1, 2001
Volume
14
Issue
1
Start / End Page
1 / 27
Related Subject Headings
- Finance
- 3801 Applied economics
- 3502 Banking, finance and investment
- 1502 Banking, Finance and Investment
- 1402 Applied Economics
- 1401 Economic Theory