Munich Personal RePEc Archive

A short-but-efficient test for overconfidence and prospect theory. Experimental validation

Peon, David and Calvo, Anxo and Antelo, Manel (2014): A short-but-efficient test for overconfidence and prospect theory. Experimental validation.

WarningThere is a more recent version of this item available.
[img]
Preview
PDF
MPRA_paper_54135.pdf

Download (356kB) | Preview

Abstract

Two relevant areas in the behaviorist literature are prospect theory and overconfidence. Many tests are available to elicit their different manifestations: utility curvature, probability weighting and loss aversion in PT; overestimation, overplacement and overprecision as measures of overconfidence. Those tests are suitable to deal with single manifestations but often unfeasible, in terms of time to be performed, to determine a complete psychological profile of a given respondent. This paper contributes to provide two short tests, based on classic works in the literature, to derive a complete profile on prospect theory and overconfidence. We conduct an experimental research with 126 students to validate the tests, revealing they are broadly efficient to replicate the regular results in the literature. The experimental analysis of all measures of overconfidence and prospect theory using the same sample of respondents allows us to provide new insights on the relationship between these two areas. Finally, enhancements for future research are suggested.

Available Versions of this Item

Logo of the University Library LMU Munich
MPRA is a RePEc service hosted by
the University Library LMU Munich in Germany.