Prior outcomes and risky choices by professional traders Current draft : December 2003
نویسنده
چکیده
How is professional risk-taking influenced by prior results? We examine the impact of past gains or losses on subsequent futures traders’ activity. The evidence provides support for the Gervais and Odean (2001) model of overconfidence: we find little relationship between higher risk taking and unusual success among these traders. Also consistent with Gervais and Odean, successful traders exhibit a relatively stronger correlation of risk with prior income. We also find that experienced traders are relatively unlikely to take unusually high risks after a period of abnormally good profits. The results suggest that while success may inspire overconfidence, experience limits the
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