Peon, David and Calvo, Anxo and Antelo, Manel (2014): A short-but-efficient test for overconfidence and prospect theory. Experimental validation.
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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.
Item Type: | MPRA Paper |
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Original Title: | A short-but-efficient test for overconfidence and prospect theory. Experimental validation |
Language: | English |
Keywords: | Experimental economics, overconfidence, prospect theory, behavioral finance, utility measurement, overestimation, overplacement, overprecision |
Subjects: | C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C91 - Laboratory, Individual Behavior D - Microeconomics > D0 - General > D03 - Behavioral Microeconomics: Underlying Principles D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty |
Item ID: | 57898 |
Depositing User: | Mr David Peon |
Date Deposited: | 14 Aug 2014 12:27 |
Last Modified: | 26 Sep 2019 14:14 |
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URI: | https://mpra.ub.uni-muenchen.de/id/eprint/57898 |
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A short-but-efficient test for overconfidence and prospect theory. Experimental validation. (deposited 07 Mar 2014 19:51)
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