Published in:Fourth Singapore International Conference on Finance 2010 Paper
Extent:
1 Online-Ressource (48 p)
Language:
Not determined
DOI:
10.2139/ssrn.1100786
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 16, 2010 erstellt
Description:
This paper studies the dynamics of investor overconfidence. Using the sum of absolute deviations from one's benchmark index (i.e., Active Share) as a proxy for confidence, we show that the average mutual fund manager tends to boost his confidence to a larger extent after receiving confirming public signals than to decrease it after disconfirming public signals. This bias is stronger among inexperienced managers and is largely absent among experienced ones. The bias also leads to poor future performance, the majority of which is driven by managers' sub-optimal portfolio choices. In dissecting managers' portfolio choices, we further document that the underperformance resulting from biased attribution is potentially due to managers' increasingly active stock picks in industries that they are less familiar with