Overconfidence, overreaction and personality

Robert B Durand, Rick Newby, Kevin Gordon Tant, Sirimon Treepongkaruna

    Research output: Contribution to journalArticleResearchpeer-review

    Abstract

    The purpose of this paper is to systematically profile investors personality traits to examine if, and how, those traits are associated with phenomena observed in financial markets. In particular, the paper looks at overconfidence and overreaction in an experimental foreign exchange market. The paper measures the personality of the subjects using the short form of the NEO-PIR instrument, the NEO-FFI developed by Costa and McRae (1992) which is based on Norman s (1963) Big Five personality constructs of negative emotion, extraversion, openness to experience, agreeableness and conscientiousness. The paper measures psychological gender using questions developed by Bem (1994). Preference for innovation and risk-taking propensity are measured using instruments developed by Jackson (1976). The paper then examines the behavior of the subject who traded interactively in real time in an interactive-simulated foreign exchange market where price discovery was instantaneous and pricing decisions were made instantaneously as items of news, determined by the researchers, were released. The paper demonstrates that personality traits are associated with overconfidence and overreaction in financial markets. The paper presents meta-analysis which facilitates the development of a posteriori theories of how particular traits affect investment; there are important roles for risk-taking propensity, negative emotion, extraversion, masculinity, preference for innovation and conscientiousness.
    Original languageEnglish
    Pages (from-to)104 - 133
    Number of pages30
    JournalReview of Behavioral Finance
    Volume5
    Issue number2
    DOIs
    Publication statusPublished - 2013

    Cite this

    Durand, R. B., Newby, R., Tant, K. G., & Treepongkaruna, S. (2013). Overconfidence, overreaction and personality. Review of Behavioral Finance, 5(2), 104 - 133. https://doi.org/10.1108/RBF-07-2012-0011
    Durand, Robert B ; Newby, Rick ; Tant, Kevin Gordon ; Treepongkaruna, Sirimon. / Overconfidence, overreaction and personality. In: Review of Behavioral Finance. 2013 ; Vol. 5, No. 2. pp. 104 - 133.
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    Durand, RB, Newby, R, Tant, KG & Treepongkaruna, S 2013, 'Overconfidence, overreaction and personality', Review of Behavioral Finance, vol. 5, no. 2, pp. 104 - 133. https://doi.org/10.1108/RBF-07-2012-0011

    Overconfidence, overreaction and personality. / Durand, Robert B; Newby, Rick; Tant, Kevin Gordon; Treepongkaruna, Sirimon.

    In: Review of Behavioral Finance, Vol. 5, No. 2, 2013, p. 104 - 133.

    Research output: Contribution to journalArticleResearchpeer-review

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