TY - JOUR
T1 - Clarifying managerial biases using a probabilistic framework
AU - Ellina, Polina
AU - Mascarenhas, Briance
AU - Theodossiou, Panayiotis
N1 - Funding Information:
This article benefitted from the presentations at the 3rd Israel Behavioral Finance Conference, Tel-Aviv, Israel, the 8th Behavioral Finance and Capital Markets Conference, Melbourne, Australia and the 16th annual conference of the Hellenic Finance and Accounting Association, Athens, Greece. We thank George Constantinides, Andrew Grant, Hersh Shefrin, Meir Statman and Itzhak Venezia and other participants at the conferences for their helpful comments and suggestions. All remaining errors are our own.
Publisher Copyright:
© 2020 Elsevier B.V.
PY - 2020/9
Y1 - 2020/9
N2 - A unifying probabilistic framework is developed to analyze and compare the impact of the psychological biases of overconfidence and underconfidence on managerial perceptions about the expected value, overall risk, downside risk, value-at-risk and expected shortfall of decision-making economic variables. The results depict that overconfident managers overestimate their expected values and underestimate downside risk, VaR and ES of decision-making variables. Underconfident managers, on the other hand, underestimate their expected values and overestimate downside risk, value-at-risk, and expected shortfall.
AB - A unifying probabilistic framework is developed to analyze and compare the impact of the psychological biases of overconfidence and underconfidence on managerial perceptions about the expected value, overall risk, downside risk, value-at-risk and expected shortfall of decision-making economic variables. The results depict that overconfident managers overestimate their expected values and underestimate downside risk, VaR and ES of decision-making variables. Underconfident managers, on the other hand, underestimate their expected values and overestimate downside risk, value-at-risk, and expected shortfall.
KW - Downside risk
KW - Expected shortfall
KW - Probability miscalibration
KW - Psychological biases
KW - Skewed normal distribution
KW - Value-at-risk
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U2 - 10.1016/j.jbef.2020.100333
DO - 10.1016/j.jbef.2020.100333
M3 - Article
AN - SCOPUS:85084606571
SN - 2214-6350
VL - 27
JO - Journal of Behavioral and Experimental Finance
JF - Journal of Behavioral and Experimental Finance
M1 - 100333
ER -