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Are pension fund managers overconfident?


Gort, Christoph; Wang, Mei; Siegrist, Michael (2008). Are pension fund managers overconfident? Journal of Behavioral Finance, 9(3):163-170.

Abstract

Empirical studies show that people tend to be overconfident about the precision of their knowledge, leading to miscalibration. Consistent with this, we found that on overage the decision makers of Swiss pension plans provide too narrow confidence intervals when asked to estimate the past return of various assets. Their confidence intervals are also systematically too narrow in their forecast of future returns, in comparison with the historical volatility. They are less miscalibrated, however, than our laymen sample. Individual differences between the participants’ degree of overconfidence are large and stable across those two different tasks. In a linear regression model we present evi-dence that miscalibration is linked to individual characteristics. In our sample younger people with an education from university and with more experience in finance or pension plans are less over-confident than older people without such an education and with less experience.

Abstract

Empirical studies show that people tend to be overconfident about the precision of their knowledge, leading to miscalibration. Consistent with this, we found that on overage the decision makers of Swiss pension plans provide too narrow confidence intervals when asked to estimate the past return of various assets. Their confidence intervals are also systematically too narrow in their forecast of future returns, in comparison with the historical volatility. They are less miscalibrated, however, than our laymen sample. Individual differences between the participants’ degree of overconfidence are large and stable across those two different tasks. In a linear regression model we present evi-dence that miscalibration is linked to individual characteristics. In our sample younger people with an education from university and with more experience in finance or pension plans are less over-confident than older people without such an education and with less experience.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Language:English
Date:2008
Deposited On:15 Jan 2009 14:04
Last Modified:05 Apr 2016 12:49
Publisher:Taylor & Francis
ISSN:1542-7560
Publisher DOI:https://doi.org/10.1080/15427560802341616
Official URL:http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=34130071&loginpage=Login.asp&site=ehost-live

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