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Can information alleviate overconfidence? A randomized experiment on financial market predictions

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  • Takanori IDA
  • Ryo OKUI

Abstract

In this study, we examine how information provision a ects the degree of overcon dence using an online experiment. The 4,210 experimental participants engaged in stock market prediction exercises were asked to evaluate their absolute and relative performance. We conducted a randomized controlled trial such that randomly selected participants obtained information about their own performance and/or the distribution of others' performances before evaluating their performances. We nd that while participants exhibit overcon dence bias, this can be alleviated by information provision and that the e ect of the elimination of overcon dence is stronger when only partial information, rather than complete information, is provided. Further, the results indicate that the mere provision of information, even if it is consistent with prior beliefs, decreases the degree of overcon dence.

Suggested Citation

  • Takanori IDA & Ryo OKUI, 2019. "Can information alleviate overconfidence? A randomized experiment on financial market predictions," Discussion papers e-19-005, Graduate School of Economics , Kyoto University.
    • Handle: RePEc:kue:epaper:e-19-005
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    More about this item

    Keywords

    Overcon dence; information provision; randomized controlled trial; online experiment; stock market prediction.;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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