Overconfidence and its relationship to investor market participation is well established in the finance literature. The research into investors and social networks is only in its infancy, however. This thesis extends the literature by expanding on both subjects individually, then bringing them together. Empirical work on individual investors in the existing literature links overconfidence and excess trading, resulting in impaired returns. The preferred activity metric, monthly account turnover, encapsulates two separate elements, though. One is trade frequency. The other is leverage use. Chapter 4 of this thesis theorizes based on the existing literature that in fact trade frequency is not a good measure of overconfidence. It then demonstrates through empirical analysis of a group of individual non-professional foreign exchange traders that leverage is much more suitable to that role. Chapter 5 turns the focus to social networks, particularly with respect to information transfer. The literature in finance anticipates that network members benefit from their membership. Further, network position (social capital) enhances that benefit. This thesis challenges that expectation with respect to non-professional investors. Findings based on analysis of members of an online retail foreign exchange trader social network indicate that while there may be an educational benefit accruing to unsophisticated members, for more sophisticated ones membership appears to have a negative effect on returns. One potential explanation for the negative impact of network membership is explored in Chapter 6 in the form of impression management. It is hypothesized that sophisticated investors are influenced in their behaviour by the realization they are being observed, and also the size of their audience. Analysis of foreign exchange traders indicates an increase in leverage use among sophisticated investors as their audience size increases, coinciding with a decline in trade excess returns, making the case for an observation-based rise in overconfidence.

A particular field in research on judgment and decision making (JDM) is concerned with realism of confidence in one’s knowledge. An interesting finding is the so-called format dependence effect, which implies that assessment of the same probability distribution generates different conclusions about over- or underconfidence depending on the assessment format. In particular, expressing a belief about some unknown continuous quantity (e.g., a stock value) in the form of an intuitive confidence interval is severely prone to overconfidence as compared to expressing the belief as an assessment of a probability judgment. This thesis gives a tentative account of this finding in terms of a Naïve Sampling Model, which assumes that people accurately describe their available information stored in memory, but they are naïve in the sense that they treat sample properties as proper estimators of population properties (Study 1). The effect of this naivety is directly investigated empirically in Study 2. A prediction that short-term memory is a constraining factor for sample size in judgment, suggesting that experience per se does not eliminate overconfidence is investigated and verified in Study 3. Age-related increments in overconfidence were observed with intuitive confidence interval but not for probability judgment (Study 4). This thesis suggests that no cognitive processing bias (e.g., Tversky & Kahneman, 1974) over and above naivety is needed to understand and explain the overconfidence “bias” with intuitive confidence interval and hence the format dependence effect.

Cette étude examine l'impact de l'incertitude sur l'optimisme et l'excès de confiance des analystes financiers. Les données de l'étude, portant sur 1758 entreprises européennes et concernant la période 1997-2007, sont extraites de la base de données IBES. Étant donné que notre période d'étude comporte un krach boursier en 2000-2001, nos tests ont été conduits avec une comparaison pré- et post-krach. L'incertitude informationnelle est approximée par l'intensité technologique. Les firmes technologiques se caractérisent par une forte incertitude liée à l'aboutissement de leurs projets d'innovations, à la forte rapidité de l'évolution technologique et au traitement comptable spécifique des immatériels. La dispersion de prévision a été utilisée aussi comme deuxième mesure de l'incertitude pour tester la robustesse des résultats fondés sur le caractère technologique. A travers les études antérieures, nous avons montré que l'optimisme des analystes est, d'une part, rationnel, justifié par des incitations économiques et, d'autre part, comportemental expliqué par le phénomène de sur-réaction aux bonnes informations et la sous-réaction aux mauvaises informations. L'excès de confiance implique une sur-réaction aux informations privées et une sous-réaction aux informations publiques. Les résultats obtenus, en se basant essentiellement sur les méthodologies développées par Amir et Ganzach (1998), Easterwood et Nutt (1999) et Bessière et Kaestner (2008), montrent un optimisme plus fort pour les firmes technologiques qui s'atténue et même disparait lorsque l'horizon de prévision décroit. Le phénomène de sur-réaction aux bonnes informations et de sous-réaction aux mauvaises informations est plus fort pour les firmes de haute technologie lorsque l'horizon de prévision est lointain. Ce phénomène s'affaiblit plus pour ces firmes et même s'inverse lorsque la date d'annonce du bénéfice estimé s'approche. Les erreurs de prévisions deviennent moins optimistes pour ces firmes voir même pessimiste. L'analyse pré- et post-krach montre un optimisme plus fort pour les entreprises de haute incertitude avant le krach. Cet optimisme disparait après le krach essentiellement chez les firmes technologiques. L'étude montre aussi que les analystes sur-réagissent plus aux informations privées et sous-réagissent plus aux informations publiques relatives aux entreprises de haute technologie par rapport à celles de faible technologie. L'excès de confiance disparait progressivement à mesure que l'on s'éloigne de la date d'annonce de l'information publique. Il s'atténue significativement après le krach plus précisément pour les firmes de haute technologie. Les résultats trouvés avec la distinction haute/faible dispersion sont globalement similaires à ceux trouvés avec la décomposition haute/faible technologie. / This study examines the impact of uncertainty on optimism and overconfidence of the financial analysts. The data of the study, concerning 1758 European firms and covering the period 1997-2007, are extracted from the IBES database. Given that our period of study includes a stock market crash in 2000-2001, our tests were driven with a comparison pre- and post-crash. Informational uncertainty is approximated by technological intensity. The high-tech firms are characterized by a strong uncertainty linked to the culmination of their innovation projects, to the strong speed of technological evolution and to the specific accounting treatment of the intangible investments. The forecast dispersion was also used as second measure of uncertainty to test the robustness of results based on the technological characteristic.Across the previous studies, we showed that the optimism of the analysts is, on the one hand, rational justified by economic instigations and, on the other hand, behavioral explained by the phenomenon of over- reaction to good information and under-reaction to bad information. The overconfidence implies an over- reaction to private information and under-reaction to public information. Our results, principally based on the methodologies developed by Amir and Ganzach (1998), Easterwood and Nutt (1999) and Bessiere and Kaestner (2008), show a stronger optimism for the high-tech firms compared to low-tech firms. This optimism reduces and even disappears when the forecast horizon decreases. The phenomenon of over-reaction to good information and under-reaction to bad information is stronger for the high-tech firms when the forecast horizon is distant. This phenomenon decreases more for these firms and is even reversed when the expected earnings announcement date approaches. The forecast error becomes less optimistic for these firms and even pessimistic with the reduction of forecast horizon. The analysis pre- and post-crash shows a stronger optimism for the high-uncertainty firms before crash. This optimism disappears after crash principally to the high-tech firms.Study shows also that the analysts over-react more to the private information and under-react more to the public information related to the high-tech firms in comparison with low-tech firms. The over confidence disappears progressively as one moves away from the announcement date of public information. It decreases significantly after crash especially for the high-tech firms. The results found with the differentiation high / low dispersion are on the whole similar to those found with the decomposition high/low-tech.

La thèse étudie l'impact de l'excès de confiance des banquiers sur le jugement, l'évaluation et la décision d'investissement (de crédit). Dans le but d'approfondir les recherches opposant experts et novices, nous avons répliqué notre étude sur des étudiants. Aux côtés des mesures et des analyses de l'excès de confiance, nous avons étudié l'attitude face au risque.Une étude qualitative a d'abord été menée, par entretiens semi-directifs avec des chargés d'affaires professionnels et directeurs d'agence. Nous avons observé des marques de surconfiance grâce à l'analyse lexicale quantitative et qualitative mais aucun lien de type cause à effet avec la décision n'a pu être établi.Ce travail a été complété par une expérimentation mesurant les différentes formes des concepts comportementaux et testant leurs impacts lors de jugement, évaluation et investissement dans des entreprises. Les résultats montrent un excès de confiance et une aversion au risque généralisés, sans différences significatives à ce stade entre les deux populations, mais de fortes disparités dans le processus d'étude des investissements et dans la prise de décision. Les étudiants ont tendance à former une impression immédiate sur les entreprises puis ils réviseront ce jugement lors de l'investissement. Les banquiers sont influencés dans leur choix d'investissement par les conclusions issues de la phase d'évaluation et leur niveau d'excès de confiance. / This work analyzes bankers' overconfidence in the granting process. Empirical and experimental work provides evidences that experts' judgment and students' judgment could differ. We have replicated our study on students and measure overconfidence and attitudes toward risk.In a first qualitative study, we analyze the bankers' overconfidence thanks to the interviews we made. We highlight their overconfidence; however we could not find any link such as cause/effect with their decisions.We extend our work with an experimentation with bankers and students. After measuring different forms of overconfidence and attitudes toward risk, we have tested the impact of overconfidence on a assets' study. Each participant had to judge, evaluate and decide to invest in different assets. The first results show that no differences can be made between bankers and students on the overconfidence and attitudes toward risk. Nevertheless, in the assets' study, students tend to form a global preference and revise their judgment during their investment (intervention of the risk aversion). On the opposite, bankers are influenced by the overconfidence bias and the evaluation stage when they form their investment choices.

Bakgrund: Färre kvinnor än män, inom finansbranschen, söker sig till fondförvaltning och yrket är således överrepresenterat av män. Studier visar på att det föreligger en skillnad i risktagande och förvaltarstil mellan kvinnor och män på professionell nivå. Vidare antyder dock empirisk forskning att skillnaderna minskar i takt med erfarenhet och att det således även föreligger en skillnad i risktagande mellan kvinnor inom fondförvaltning och kvinnor i allmänhet. Generellt sett är kvinnor i allmänhet mer riskaversiva än män. Detta tyder på att kvinnor inom fondförvaltning är en utmärkande grupp, vilket motiverar ytterligare undersökning. Syfte: Syftet med uppsatsen är att undersöka kvinnliga fondförvaltares erfarenheter kring och syn på skillnader och orsaker till skillnader mellan kvinnors och mäns risktagande på både generell och professionell nivå. Vidare ämnar studien att analysera och jämföra den eget insamlade empirin gentemot den empiriska forskningslitteraturen om kvinnligt och manligt risktagande och förvaltarstil i syfte att kunna föreslå nya hypoteser kring vad som styr kvinnligt professionellt risktagande. Genomförande: Studien utfördes genom ett kvalitativt metodval, i form av personliga intervjuer. Sammanlagt hölls 8 intervjuer med kvinnliga fondförvaltare. Urvalet skedde utifrån en egen kartläggning av kvinnliga fondförvaltare, med säte i Sverige, med sammanställd information om deras förvaltade fonder. Slutsats: Sammanfattningsvis har studien genererat ett antal hypoteser. En första hypotes är att vana och erfarenhet påverkar risktagande och beslutsprocessen då användandet av system 1 ökar. En andra hypotes är att forskning ger en felaktig bild av verkligheten då denna inte tar hänsyn till snedfördelningen i branschen eller förvaltarens mandat. På generell nivå genererades en hypotes att skillnader i risktagande och omsättning inte beror på genus utan snarare grundas i intresse. / Background: Fewer women than men, within finance, work as a fund manager and the profession is therefore overrepresented by men. Studies show the existence of differences in risk and management style between women and men on a professional level. However indicates empirical studies that these differences reduce when the professional experience grows and that there also is a difference in risk-taking between women in fund management and women in general. Generally are women more risk aversive than men. This indicates that women in fund management are a distinctive group, which motivates further studying. Aim: The aim with this thesis is to inquire female fund managers’ experiences in the difference between women and men concerning risk-taking and management style, on a general and professional level, and the difference between professional women and women in general. Furthermore, the study aims to analyze and compare the result with the empirical research. Completion: The study was conducted by a qualitative method, through personal interviews. A total of eight interviews were held with female fund managers. The selection was based on a survey of female fund managers, geographically located in Sweden. Conclusion: In conclusion, the study has generated three hypotheses. Firstly, practice and experiences affects risk-taking and decision-making process since the use of system 1 increases. Secondly, previous research provides an inaccurate picture of the reality since this does not account for the disparity in the industry or the trustee's mandate. On a general level, a hypothesis was generated that the difference in risk-taking and turnover does not arise because of gender.

Consumer value is an important determinant of consumers’ post-use behaviour, for example satisfaction, repeat purchase and word of mouth. The existing research mainly looks at the factors associated with the product and service providers to improve consumer value. Few studies on the role of the consumer in shaping consumer value have found consumer knowledge to be an important element in shaping consumer value. Adopting critical realism, this PhD expands this area of knowledge by investigating knowledge miscalibration (i.e., the inaccuracy in subjective knowledge) as a significant antecedent of consumer value. Most of the time, consumers’ perceptions of what they think they know (i.e., subjective knowledge) has been shown to be different from what they actually know (i.e., objective knowledge). Thus, subjective knowledge is usually inaccurate. This inaccuracy in subjective knowledge relative to objective knowledge is called knowledge miscalibration. Although the effect of knowledge miscalibration on consumers’ purchasing decisions has been investigated in the consumer behaviour literature, its role in the use stage of consumption has received much less attention. The aim of this research is to examine the effect of knowledge miscalibration on product or service use, and more specifically on the value consumers derive from actually using products or services (i.e., value-in-use). In this research a critical realism paradigm is pursued, implying that reality exists in the three domains of the empirical, the actual and the real. The research starts with observing regularity in the empirical domain (i.e., consumer value) followed by imagining the causal power in the actual and the real domains (i.e., knowledge miscalibration), shaping the research question. A retroductive strategy is followed, firstly by proposing the effect of knowledge miscalibration on consumer value and secondly by conceptually and empirically testing this relationship. This research conceptualises that knowledge miscalibration influences consumer value dimensions, described as efficiency, excellence, play and aesthetics. It is suggested that underconfidence (i.e., knowledge miscalibration where subjective knowledge is deflated) and overconfidence (i.e., knowledge miscalibration where subjective knowledge is inflated) influence consumer value dimensions differently as they generate different consequences in use. Therefore, a conceptual model is developed that describes the effect of knowledge miscalibration (i.e., overconfidence and underconfidence) on the dimensions of consumer value. The empirical part of the research is designed by conducting a covariance-based study and an experimental investigation in order to gain both internal and external validity. The covariance-based investigation is conducted in the context of amazon.com online shopping. Knowledge miscalibration and consumer value dimensions are measured in this study. This study supports the negative effect of underconfidence on efficiency, excellence, play and aesthetics and the negative effect of overconfidence on play. The experimental investigation is designed in the context of prezi.com, an online dynamic presentation creation website that enables its users to move between slides, words and images during their presentations. In this study, overconfidence and underconfidence are manipulated and their effects on the dimensions of consumer value are examined. The findings of this study show that underconfidence negatively influences efficiency, excellence and aesthetics, while overconfidence negatively impacts excellence, play and aesthetics. Overall, this PhD concludes that knowledge miscalibration negatively influences the dimensions of consumer value, with the exception of overconfidence impacting efficiency. The contradictory results of the covariance-based study observed in the experimental study can be explained through its inability to account for reciprocal relationships (i.e., where consumer value dimensions also impact knowledge miscalibration) and the existence of a third variable affecting both independent and dependent variables. Furthermore, the context of the experimental study (employing a new consumption task) is proposed to be the main reason for the lack of support for the effect of underconfidence on play.

Submitted by Adriana Alves Rodrigues (aalves@espm.br) on 2017-11-27T15:08:59Z No. of bitstreams: 1 RICARDO CHAGAS CRUZ.pdf: 3631528 bytes, checksum: d7406d3ffae303b0aa796fd26dd3efe3 (MD5) / Approved for entry into archive by Adriana Alves Rodrigues (aalves@espm.br) on 2017-11-27T15:09:45Z (GMT) No. of bitstreams: 1 RICARDO CHAGAS CRUZ.pdf: 3631528 bytes, checksum: d7406d3ffae303b0aa796fd26dd3efe3 (MD5) / Approved for entry into archive by Ana Cristina Ropero (ana@espm.br) on 2017-12-01T11:20:37Z (GMT) No. of bitstreams: 1 RICARDO CHAGAS CRUZ.pdf: 3631528 bytes, checksum: d7406d3ffae303b0aa796fd26dd3efe3 (MD5) / Made available in DSpace on 2017-12-01T11:22:21Z (GMT). No. of bitstreams: 1 RICARDO CHAGAS CRUZ.pdf: 3631528 bytes, checksum: d7406d3ffae303b0aa796fd26dd3efe3 (MD5) Previous issue date: 2017-08-29 / The use of heuristics to support the rational analysis of economic agents when making decisions regarding gains and losses in the decision-making process in finance, from the 70's began to be questioned by scholars of Experimental Economics and Psychology generating A theoretical framework today called Behavioral Finance. With the contributions of Daniel Kahneman and Amos Tversky, Nobel Laureates in Economics (2002), the studies have taken a considerable boost in the finances of international and national markets that seek to understand how the investor comes to live with the uncertainties inherent in the process of Financial choice. This work sought to identify the relation of the heuristics of overconfidence and anchorage, when related to the level of knowledge of the investors in the consumption of financial investments when the investors become surplus. Decision making in the consumption of financial assets is permeated by uncertainties and risks of the most diverse nature, and has been studied since the 1950s, but it was in the 20th century that heuristics were considered as references capable of impacting the consumption decision of a Financial product. Through a quantitative research in class A and B - potential social layers of financial investments, we sought to investigate whether knowledge can impact the decision to choose a financial application. / O uso de heurísticas para o suporte da análise racional dos agentes econômicos quando da tomada de decisão em relação a ganhos e perdas no processo decisório em finanças, a partir da década de 70 passou a ser motivo de questionamento dos estudiosos de Economia e Psicologia Experimental gerando um arcabouço teórico hoje denominado Finanças Comportamentais. Com as contribuições de Daniel Kahneman e Amos Tversky, laureados com o Prêmio Nobel de Economia (2002), os estudos tomaram um impulso considerável nas finanças de mercados internacionais e nacionais que buscam entender como o investidor passa a conviver com as incertezas inerentes ao processo de escolha financeira. Este trabalho procurou identificar a relação das heurísticas de excesso de confiança e ancoragem, quando relacionadas ao nível de conhecimento dos investidores no consumo das aplicações financeiras quando os investidores se tornam superavitários. A tomada de decisão no consumo de ativos financeiros está permeada de incertezas e risco das mais diversas naturezas, e tem sido estudada desde a década de 50, porém foi no século XX que as heurísticas foram consideradas referenciais capazes de impactar a decisão de consumo de um produto financeiro. Por meio de uma pesquisa quantitativa na classe A e B – camadas sociais potenciais consumidoras de aplicações financeiras, procurou-se investigar se o conhecimento pode impactar na decisão de escolher uma aplicação financeira.

Ce travail cherche à mieux comprendre les facteurs cognitifs en jeu dans les différentes étapes d’élaboration et de réalisation du projet entrepreneurial : quel est l’impact de la cognition entrepreneuriale sur la réalisation et le succès d’une opportunité d’innovation ? Pour répondre à cette question nous décomposons la problématique en trois axes. Le premier essai propose un modèle conceptuel de l’innovation entrepreneuriale en tant que processus individuel. Nous conceptualisons les différentes activités – génération d’une idée créative, évaluation et implémentation – et examinons leurs spécificités et l’influence des facteurs cognitifs sur chaque étape. Le deuxième article présente une analyse empirique qui teste les hypothèses issues du modèle à travers une expérimentation avec 70 entrepreneurs. Le design expérimental permet de reproduire le processus d’innovation, depuis la génération de l’idée jusqu’à l’implémentation tout en offrant également une mesure de la performance de l’innovation sur le marché. Nos résultats montrent que la créativité est un facteur d’innovation mais que ce lien entre génération de l’idée et implémentation est influencé par les facteurs cognitifs : excès de confiance, optimisme et comportement face au risque. Le troisième article se concentre sur la décision par des individus innovants de créer ou non leur entreprise. Avec une étude quantitative sur 124 chercheurs, dont 76 ont créée leur entreprise, nous apportons un éclairage au lien entre innovation et création d’entreprise : être innovant ne suffit pas pour devenir entrepreneur, l’effet du sentiment d’auto-efficacité et du comportement face au risque sont des éléments déterminants. / This thesis investigates the cognitive factors involved all along the entrepreneurial process and their impact over the different activities underlying such process. We aim at answering the research question: What is the impact of entrepreneurial cognition on the successful implementation of an innovation?To tackle this question, we depicted the subject in three axes. The first essay proposes a conceptual model of individual innovation embedded in the entrepreneurial process. We conceptualize the different stages of creative idea generation, evaluation and implementation and examine the peculiarities of each stage and the influence of cognitive factors. The second paper presents an empirical analysis that tests the hypotheses issued from the model through an economic experiment with 70 entrepreneurs. The experimental design provides an objective measure of innovation and imitates every stage of the process: from the generation of ideas all throughout the implementation and performance of innovations in the market. Our findings show that although creativity is the source of innovations, the relationship between generation of ideas and its implementation is influenced by cognitive factors: overconfidence, optimism and risk-taking. The third essay focuses on the decision by innovative individuals to start a venture. Building on a quantitative study with 124 researches, from which 76 created their venture, we contribute to the debate about the link between innovation and entrepreneurship: being innovative is not enough for becoming an entrepreneur, self-efficacy beliefs an risk-taking behavior are two drivers of individual’s decision to start a venture.

This dissertation examines the effects that intangible capital and diversity reputation have on firm performance. In Chapter 1, entitled “CEO Overconfidence and Intangible Corporate Investments,” we extend the corporate investment and CEO overconfidence literature by examining how CEO overconfidence affects investment-cashflow sensitivity using a new measure of Tobin’s q and cashflow. Specifically, we incorporate intangible capital, which neo-classical investment theory mostly ignores, in the empirical analysis. We develop three overconfidence measures and their interaction with the respective standard and new cashflow settings to capture the investment-cashflow sensitivity effect of CEO overconfidence. We use three investment measures (physical, intangible, and total investments) and find that the effect of managerial overconfidence on investment-cashflow sensitivity is more prominent for corporate intangible investments than physical investments. Moreover, our results show that the standard measure of physical capital weakly explains the intangible investment-cashflow density. Our study offers useful insights in that it explains the reason why investment-cashflow sensitivity has been weaker in recent years. We also show that investment-cashflow sensitivity is stronger when intangible capital is incorporated into the analysis. Chapter 2 is entitled “Diversity Reputation and Firm Performance.” The modern American workplace is a microcosm of modern American society. The increasing diversity of the American workforce has made the increasing diversity of the American workplace a necessity. We explore the impact of diversity reputation on firm performance. We measure a firm’s diversity reputation by its inclusion in DiversityInc’s list of Top 50 Companies for Diversity. We measure firm performance by various accounting measures (return on assets, return on investment, and return on sales) as well as one market-based measure, Tobin’s Q. We find that firms that have a better diversity reputation outperform firms that do not.

<p>A particular field in research on judgment and decision making (JDM) is concerned with realism of confidence in one’s knowledge. An interesting finding is the so-called format dependence effect, which implies that assessment of the same probability distribution generates different conclusions about over- or underconfidence depending on the assessment format. In particular, expressing a belief about some unknown continuous quantity (e.g., a stock value) in the form of an intuitive confidence interval is severely prone to overconfidence as compared to expressing the belief as an assessment of a probability judgment. This thesis gives a tentative account of this finding in terms of a Naïve Sampling Model, which assumes that people accurately describe their available information stored in memory, but they are naïve in the sense that they treat sample properties as proper estimators of population properties (Study 1). The effect of this naivety is directly investigated empirically in Study 2. A prediction that short-term memory is a constraining factor for sample size in judgment, suggesting that experience per se does not eliminate overconfidence is investigated and verified in Study 3. Age-related increments in overconfidence were observed with intuitive confidence interval but not for probability judgment (Study 4). This thesis suggests that no cognitive processing bias (e.g., Tversky & Kahneman, 1974) over and above naivety is needed to understand and explain the overconfidence “bias” with intuitive confidence interval and hence the format dependence effect.</p>