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Anxiety, Overconfidence, and  Excessive Risk Taking
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Anxiety, Overconfidence, and Excessive Risk Taking


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自动生成的音频

Editorial Rating

7

Qualities

  • Innovative

Recommendation

F. Scott Fitzgerald observed that the rich “are different from you and me.” So how are the ultrasuccessful able to make the momentous decisions on which they build their fortunes? The self-confidence of Wall Street bankers and captains of industry is well documented, but how they achieve that assurance is less known. This academic paper offers an interesting hypothesis: It all comes down to forgetting the right information. getAbstract suggests this technical paper to risk specialists who wish to account for the overconfidence of decision makers in economic modeling.

Take-Aways

  • Psychological research confirms that, in matters of judgment, overconfidence is a prevalent human characteristic.
  • In financial transactions, anxiety manifests as the tendency to take lower risks in immediate events but higher risks in later decisions.
  • By selectively forgetting information, decision makers can better align future decisions with their current appetite for risk.

About the Authors

Thomas M. Eisenbach is an economist at the Federal Reserve Bank of New York. Martin C. Schmalz is an assistant professor of finance at the University of Michigan.


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