Overconfidence,risk perception and the risk-taking behavior of finance professionals |
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| Institution: | 1. School of Business and Economics, Humboldt University of Berlin, Dorotheenstr. 1, 10099 Berlin, Germany;2. Price College of Business, University of Oklahoma, 307 West Brooks, Norman, OK 73019, USA;1. Dipartimento di Ingegneria Civile e Architettura, Università di Catania, Viale A. Doria, 6, Catania, Italy;2. Dipartimento di Ingegneria Industriale, Università di Catania, Viale A. Doria, 6, Catania, Italy;1. Bogazici University, Department of Management, 34342 Bebek, Istanbul, Turkey;2. Borsa ?stanbul, Re?itpa?a Mahallesi, Tuncay Artun Caddesi, Sar?yer 34467, ?stanbul, Turkey |
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| Abstract: | This paper highlights the role played by overconfidence and risk perception in the risk-taking behaviors of finance professionals. We interviewed 64 high-level professionals and demonstrate that they are overconfident in both the general and the financial domains. Using a recent measure proposed by Glaser et al. (2013), we indicate that respondents are overconfident in forecasting future stock prices. We demonstrate that the risk they are willing to assume is positively influenced by overconfidence and optimism and negatively influenced by risk perception. However, the stock return volatility anticipated is, in most cases, an insignificant determinant of the risk that professionals are ready to assume. |
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| Keywords: | Overconfidence Risk taking Risk perception Finance professionals Investor behavior |
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