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True overconfidence, revealed through actions: An experiment

Stephen L. Cheung & Lachlan Johnstone

Journal of Risk and Uncertainty2025https://doi.org/10.1007/s11166-025-09452-ypreprint
AJG 3ABDC A*
Weight
0.50

Abstract

We design an experiment to infer true overconfidence in relative ability through actions, as opposed to reported beliefs. Subjects choose how to invest earnings from a skill task where the returns depend either solely upon risk, or both risk and relative placement, enabling joint estimation of individual risk preferences and implied subjective beliefs of placing in the top half. We find evidence of aggregate overconfidence only in a treatment that receives minimal feedback on performance in a trial round. In treatments that receive more detailed feedback aggregate overconfidence is not observed, however identifiable segments of over- and underconfident individuals persist.

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https://doi.org/https://doi.org/10.1007/s11166-025-09452-y

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@article{stephen2025,
  title        = {{True overconfidence, revealed through actions: An experiment}},
  author       = {Stephen L. Cheung & Lachlan Johnstone},
  journal      = {Journal of Risk and Uncertainty},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1007/s11166-025-09452-y},
}

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True overconfidence, revealed through actions: An experiment

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.