Human capital accumulation and the evolution of overconfidence

Artikel

This paper studies the evolution of overconfidence over a cohort's working life. To do this, the paper incorporates subjective assessments into a continuous time human capital accumulation model with a finite horizon. The main finding is that the processes of human capital accumulation, skill depreciation, and subjective assessments imply that overconfidence first increases and then decreases over the cohort's working life. In the absence of skill depreciation, overconfidence monotonically increases over the cohort's working life. The model generates four additional testable predictions. First, everything else equal, overconfidence peaks earlier in activities where skill depreciation is higher. Second, overconfidence is lower in activities where the distribution of income is more dispersed. Third, for a minority of individuals, overconfidence decreases over their working life. Fourth, overconfidence is lower with a higher market discount rate. The paper provides two applications of the model. It shows the model can help make sense of field data on overconfidence, experience, and trading activity in financial markets. The model can also explain experimental data on the evolution of overconfidence among poker and chess players.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Journal: Games ; ISSN: 2073-4336 ; Volume: 11 ; Year: 2020 ; Issue: 4 ; Pages: 1-19 ; Basel: MDPI

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Personal Income, Wealth, and Their Distributions ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡ ; Human Capital; Skills; Occupational Choice; Labor Productivity
• Thema: human capital ; overconfidence ; subjective assessments

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Santos-Pinto, Luis
• Ereignis: Veröffentlichung
• (wer): MDPI
• (wo): Basel
• (wann): 2020

Weitere Informationen

• DOI: doi:10.3390/g11040046
• Handle: http://hdl.handle.net/10419/257464
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ