Journal Article

Financial Professionals' Overconfidence: Is It Experience, Function, or Attitude?

Author

  • Lukas Menkhoff
Publication Date

This paper examines financial professionals’ overconfidence in their forecasting performance. We compare individuals’ self-rating of performance with the true performance, both measured relative to the same peer group. The forecasters in our sample show overconfidence on average, although to a moderate degree, including many cases of underconfidence. In analysing this, we find that working experience is accompanied by less overconfidence. Function is also related to less overconfidence, such as being a fund manager and using fundamental analysis. The same effect is found for the attitude to herd, whereas recent success appears with more overconfident professionals.

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Key Words

  • better-than-average
  • forecasting
  • Foreign Exchange
  • performance
  • self-rating