126 Can information alleviate overconfidence? A randomized experiment on financial market predictions
- Takanori Ida; Ryo Okui
- ocweb.pdf
Abstract
In this study, we examine how information provision affects the degree of overconfidence
using an online experiment. The 4,210 experimental participants engaged in stock market
prediction exercises in 2014 were asked to evaluate their absolute and relative performance.
We conducted a randomized controlled trial such that randomly selected participants obtained
information about their own performance and/or the distribution of others' performances
before evaluating their performances. We find that while participants exhibit overconfidence
bias, this can be alleviated by information provision and that the effect of the elimination of
overconfidence is stronger when only partial information, rather than complete information,
is provided. Further, we show that the mere provision of information, even if it is consistent
with prior beliefs, decreases the degree of overconfidence.
Keywords: Overconfidence; information provision; randomized controlled trial; online experiment; stock market prediction
JEL classification: C91; D83; D91; G41