The one-man show: the effect of joint decision-making on investor overconfidence

Piehlmaier, Dominik (2022) The one-man show: the effect of joint decision-making on investor overconfidence. Journal of Consumer Research. pp. 1-21. ISSN 0093-5301

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Abstract

This study examines the impact of shared decision-making on investor overconfidence. Data from 2,000 investors, 6,394 consumers, and 657 experimental participants shed light on whether consumers who engage in joint financial decision-making are less affected by investor overconfidence than those who decide on their own. The findings show that investors who jointly decide are substantially less overconfident. However, family- or friend-inclined interactions are more effective in reducing overconfidence than relying on a financial advisor.
The current research theoretically argues and empirically shows that shared metaknowledge drives this diminishing effect by highlighting unknown aspects of a financial decision. Compared to providing investors with solutions, problem reformulation, validation, or legitimation, only metaknowledge consistently decreases overconfidence in joint financial decision-making. It is argued that the process of highlighting unknowns can explain why interactions with family and friends have a more pronounced impact on investor overconfidence than consulting a professional advisor. The study provides a feasible debiasing tool to consumers, financial institutions, and other financial service providers to decrease overconfidence by emphasizing unknown aspects of an investment toward improving the quality of a consumer’s financial decisions under uncertainty.

Item Type: Article
Schools and Departments: University of Sussex Business School > Strategy and Marketing
SWORD Depositor: Mx Elements Account
Depositing User: Mx Elements Account
Date Deposited: 05 Dec 2022 11:04
Last Modified: 17 Jan 2023 10:45
URI: http://sro.sussex.ac.uk/id/eprint/109411

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