Prof. Nicole Branger from the University of Muenster is giving a VGSF
research seminar on "Rational Laymen versus Over-Confident Experts: Who
Survives in the Long Run?" on FRIDAY, Nov. 17th, from 15:30 to 17:00 at the
WU Wien (Seminarraum D204, UZA 4, Nordbergstrasse 15, 1090 Wien, see
http://www.wu-wien.ac.at/portal/ueber_wu/standorte/lageplan4 for a detailed
plan). Please find the paper's abstract below.
Nicole is going to be available for meetings on Friday. If you are
interested, please contact Michael Halling (michael.halling(a)univie.ac.at).
Best,
Michael Halling
Abstract
In this paper we study the equilibrium in a heterogeneous economy with two
groups of investors. Over-confident experts incorrectly assume that their
signal for the drift of the dividend process is correlated with the true
drift, but interpret the signal otherwise perfectly. Rational laymen avoid
the experts' error, but their signal is noisier than that received by the
experts. We investigate which of these two problems is more severe by
computing long-run equilibrium consumption shares for the two groups. Our
results indicate that overconfidence might be a more serious problem than
limited information processing capability.