Search results for "Overconfidence effect"
showing 8 items of 8 documents
How Do Judgmental Overconfidence and Overoptimism Shape Innovative Activity?
2013
Recent field evidence suggests a positive link between overconfidence and innovative activities. In this paper we argue that the connection between overconfidence and innovation is more complex than the previous literature suggests. In particular, we show theoretically and experimentally that different forms of overconfidence may have opposing effects on innovative activity. While overoptimism is positively associated with innovation, judgmental overconfidence is negatively linked to innovation. Our results indicate that future research is well advised to take into account that the relationship between innovation and overconfidence may crucially depend on what type of overconfidence is most…
Financing successful small business projects
2014
Purpose – The current credit rationing strongly influences the viability of SMEs innovation projects. In this context, the practice of screening borrowers by project success probability has become a paramount consideration for both lenders and firms. The aim of this paper is to test the screening role of loan contracts that consider collateral-interest margins simultaneously. Design/methodology/approach – This paper presents an empirical analysis that uses a unique data set composed of 323 bank loans granted by 28 banks to SMEs backed by a Spanish Mutual Guarantee Institution. Findings – The results show that appropriate combinations of collateral and interest rates can distinguish between…
2020
Domain-specific understanding of digitally represented graphs is necessary for successful learning within and across domains in higher education. Two recent studies conducted a cross-sectional analysis of graph understanding in different contexts (physics and finance), task concepts, and question types among students of physics, psychology, and economics. However, neither changes in graph processing nor changes in test scores over the course of one semester have been sufficiently researched so far. This eye-tracking replication study with a pretest-posttest design examines and contrasts changes in physics and economics students' understanding of linear physics and finance graphs. It analyze…
The bright and dark sides of CEO hubris: Assessing cultural distance in international business
2021
This paper aims to enrich the behavioral theory of international business strategyby investigating how CEO hubris (i.e., excess pride and confidence) affects inter-national strategic choices, that is, location selection, entry timing, and modes ofentry into the target market. Specifically, we focus on the relationship betweencultural distance and international strategic choices and consider hubris as a mech-anism that influences CEOs’ decisions. Our conceptual framework recognizes thatthe performance of international strategies managed by hubristic CEOs isextremely volatile. On the one hand, we corroborate the idea that hubris has adark side that may lead to pernicious outcomes. On the othe…
Determinants of Individual Investment Decisions in Investment-Based Crowdfunding
2017
We investigate determinants of investment decisions in investment-based (equity and real estate) crowdfunding, using a novel investment-, investor- and campaign-level database. We find that this market is a man's world, with nearly 93% of investments made by men. Consistent with behavioral and finance theories, we find that women invest less in the riskiest investments but more in safer ones. Further analyses show that these findings are better explained by differences in risk aversion than differences in overconfidence between men and women. Investors located in an area considered more "sociable" (socially friendly) also invest more, but only if the investor is a woman. Overall, the findin…
Why retail investors traded equity during the pandemic? An application of artificial neural networks to examine behavioral biases
2021
Behavioral biases are known to influence the investment decisions of retail investors. Indeed, extant research has revealed interesting findings in this regard. However, the literature on the impact of these biases on millennials' trading activity, particularly during a health crisis like the COVID-19 pandemic, as well as the equity recommendation intentions of such investors, is limited. The present study addressed these gaps by investigating the influence of eight behavioral biases: overconfidence and self-attribution, over-optimism, hindsight, representativeness, anchoring, loss aversion, mental accounting, and herding on the trading activity and recommendation intentions of millennials …
Investor Sentiment or Managerial Overconfidence: The Back Room of Acquisitions
2017
In this study, we investigate bidder performance (both in the short and the long term) in periods of high and low valuation market in response to announcements of acquisitions carried out by Spanish listed firms over the period 1991-2011. We provide evidence that bidder reaction to acquisitions, in both the short and the long term, is not consistent with the predictions of investor sentiment (optimism) after controlling for target type. However, our findings after controlling for bidder market-to-book ratio reveal under reaction in acquisitions of listed targets that is not independent of the market sentiment, since it is greater in hot periods. Finally, the results are not so consistent fo…
How Do Judgmental Overconfidence and Overoptimism Shape Innovative Activity?
2021
Recent field evidence suggests a positive link between overconfidence and innovative activities. In this paper we argue that the connection between overconfidence and innovation is more complex than the previous literature suggests. In particular, we show theoretically and experimentally that different forms of overconfidence may have opposing effects on innovative activity. While overoptimism is positively associated with innovation, judgmental overconfidence is negatively linked to innovation. Our results indicate that future research is well advised to take into account that the relationship between innovation and overconfidence may crucially depend on what type of overconfidence is most…