search query: @freeterm overconfidence / total: 7
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| Author: | Ko, K.J. Huang, Z.(J.) |
| Title: | Arrogance can be a virtue: Overconfidence, information acquisition, and market efficiency |
| Journal: | Journal of Financial Economics
2007 : MAY, VOL. 84:2, p. 529-560 |
| Index terms: | market efficiency pricing information models |
| Freeterms: | behavioural finance overconfidence |
| Language: | eng |
| Abstract: | In behavioral finance, overconfidence (hereafter as: o-c.) is established as a prevalent psychological bias. A model is developed in which o-c. causes investors to over-invest in information (as: info.) acquisition (as: acqsn.) when this info. could improve market efficiency through change of prices. Studied is the impact of o-c. on mispricing and info. acqsn., comparing their net effect on prices. It is found that o-c. generally improves market pricing provided the level of o-c. is not too high. Pricing can also improve even when o-c. is arbitrarily high, depending on the amount of private info. acquired relative to publicly available information. |
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