Financial Professionals' Overconfidence: Is It Experience, Function, or Attitude?


  • We thank participants at the annual conferences of the European Financial Management Association, German Economic Association, German Finance Association, Money Macro Finance Research Group, and the Royal Economic Society, as well as the audiences of several seminars, in particular Michael Bräuninger, Jerry Coakley, Michael Frenkel, Markus Glaser, Alan Kirman, Thomas Lux, Christian Pfeifer, Winfried Pohlmeier, Michael Schröder and Philipp Sibbertsen for their helpful comments and discussion. We gratefully acknowledge very constructive comments by the editor and two anonymous referees. In addition, we thank the Centre for European Economic Research (ZEW) in Mannheim, Germany, for providing the data set. Oliver Gloede gratefully acknowledges a scholarship of the Foundation of German Business (Stiftung der Deutschen Wirtschaft).


This paper examines financial professionals’ overconfidence in their forecasting performance. We compare individuals’ self-rating of performance with the true performance, both measured relative to the same peer group. The forecasters in our sample show overconfidence on average, although to a moderate degree, including many cases of underconfidence. In analysing this, we find that working experience is accompanied by less overconfidence. Function is also related to less overconfidence, such as being a fund manager and using fundamental analysis. The same effect is found for the attitude to herd, whereas recent success appears with more overconfident professionals.