Overconfidence in Psychology andFinance- An Interdisciplinary Literature Review

Paper: SSRN 1261907

Abstract

This paper reviews the literature on one of the most meaningful concepts in modern behavioural finance, the overconfidence phenomenon. Overconfidence is present

Complexity vs Empirical Score

• Math Complexity: 1.5/10
• Empirical Rigor: 2.0/10
• Quadrant: Philosophers — conceptual discussion, limited math and data

Why this score: The paper is a literature review focusing on psychological theory and conceptual definitions with minimal mathematical formalism or quantitative modeling, and it relies on existing studies rather than presenting new backtests or implementation-heavy data analysis.

Research Flowchart

  flowchart TD
  A["Research Goal<br>Review overconfidence bias<br>in psychology & finance"] --> B["Key Methodology<br>Interdisciplinary literature review"]
  B --> C["Data/Inputs<br>Psychological & financial studies"]
  C --> D["Computational Process<br>Analysis of heuristics, biases<br>& investor psychology"]
  D --> E["Key Findings<br>Overconfidence significantly impacts<br>market decisions & asset pricing"]