Disposed to be Overconfident
21 May 2024
13:15 -14:30
Times are shown in local time.
Open to: All
Room W2.02 (Cambridge Judge Business School)
Trumpington St
Cambridge
CB2 1AG
United Kingdom
Join our Finance seminar
Speaker: Dr Katrin Gödker, Bocconi University
About the seminar topic
We show that the disposition effect – the tendency of investors to hold losers and sell winners – can be a source of overconfidence. We find experimental evidence that individuals update beliefs about their own investment ability based on realized gains and losses rather than the overall performance of their portfolio. We also find supporting field evidence.
Dutch retail investors who realized more gains than losses believe they have higher portfolio performance relative to other investors, even after controlling for their actual portfolio performance. We develop a formal model demonstrating how the disposition effect leads to overconfidence and examine model implications for investors’ trading behaviour and expected profit.
Speaker bio
Katrin Gödker is an Assistant Professor of Finance at Bocconi University and a CESifo & IGIER Affiliate. She is an empiricist working in the field of Behavioural Finance. Much of her work studies investor beliefs and how they affect investor behaviour using experiments (lab, online, and field) as well as archival datasets.
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No registration required. If you have any questions about this seminar, please email Emily Brown.