Behavioral biases never walk alone: an empirical analysis of the effect of overconfidence on probabilities
This paper presents evidence of the impact of overconfidence bias in asset prices drawn from a study based on data from tennis betting exchanges. A series of betting strategies in tournaments with a clear-cut favourite are shown to yield significant economic returns. The impact of overconfidence bia...
| Autores: | , , |
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| Tipo de recurso: | artículo |
| Estado: | Versión aceptada para publicación |
| Fecha de publicación: | 2014 |
| País: | España |
| Institución: | Universidad Pública de Navarra |
| Repositorio: | Academica-e. Repositorio Institucional de la Universidad Pública de Navarra |
| OAI Identifier: | oai:academica-e.unavarra.es:2454/18743 |
| Acceso en línea: | https://hdl.handle.net/2454/18743 |
| Access Level: | acceso abierto |
| Palabra clave: | Overconfidence Betting exchanges Anomalies Behavioural finance |
| Sumario: | This paper presents evidence of the impact of overconfidence bias in asset prices drawn from a study based on data from tennis betting exchanges. A series of betting strategies in tournaments with a clear-cut favourite are shown to yield significant economic returns. The impact of overconfidence bias on betting odds increases with trading volume, media coverage, and levels of disagreement between overconfident and Cumulative Prospect Theory bettors. Just as in traditional financial markets, arbitrage limits are shown to be a necessary condition for the impact of behavioural biases on prices. |
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