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The one-man show: the effect of joint decision-making on investor overconfidence
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.
History
Publication status
- Published
File Version
- Published version
Journal
Journal of Consumer ResearchISSN
0093-5301Publisher
Oxford University PressExternal DOI
Page range
1-21Department affiliated with
- Strategy and Marketing Publications
Full text available
- Yes
Peer reviewed?
- Yes
Legacy Posted Date
2022-12-05First Open Access (FOA) Date
2023-01-17First Compliant Deposit (FCD) Date
2022-12-05Usage metrics
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