The Demographics of Overconfidence

As is well-known, investors are subject to overconfidence. Using a survey of about 2,000 defined contribution pension plan members, we not only corroborate this, but also explore the demographics of this behavioral flaw. Noting that overconfidence can be partitioned into certainty and knowledge, we find that highly-educated males who are nearing retirement, who have received investment advice, and who have experience investing for themselves, tend to have a higher certainty level. For some groups knowledge matches certainty. Because highly-educated males do not have higher levels of knowledge we conclude that they are more subject to overconfidence.

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