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Abstract

This paper reviews the literature on one of the mostmeaningful concepts in modern behavioural finance,the overconfidence phenomenon. Overconfidence ispresented as a well-developed psychological theory,with main facets comprising miscalibration, betterthan-average effect, illusion of control and unrealisticoptimism. The primary applications of overconfidencein contemporary finance are analysed, from theperspective of financial markets and corporate behaviour.Experimental studies, formal models and analyses ofmarket data demonstrate that overconfidence at leastpartially solves some financial market puzzles thatcannot be accounted for by standard economic theory.Overconfidence in the corporate context may affect notonly a company’s internal financing structure, but alsoits interactions with other market participants throughmerger and acquisition activity.



Item Type: MPRA Paper -

Original Title: Overconfidence in Psychology and Finance – an Interdisciplinary Literature Review-

Language: English-

Keywords: overconfidence, behavioral finance, investorpsychology, financial markets, corporate policies,overconfident investors-

Subjects: D - Microeconomics > D0 - General > D03 - Behavioral Microeconomics: Underlying PrinciplesG - Financial Economics > G0 - General > G00 - General-





Autor: Skala, Dorota

Fuente: https://mpra.ub.uni-muenchen.de/26386/







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