Comments on: Yes, But WE’RE Above Average http://baselinescenario.com/2008/12/02/yes-but-were-above-average/ What happened to the global economy and what we can do about it Sat, 02 Jun 2012 18:26:14 +0000 hourly 1 http://wordpress.com/ By: James Kwak http://baselinescenario.com/2008/12/02/yes-but-were-above-average/#comment-1713 Wed, 03 Dec 2008 13:25:17 +0000 http://baselinescenario.wordpress.com/?p=1498#comment-1713 Thanks very much. This is great.

]]> By: Neil http://baselinescenario.com/2008/12/02/yes-but-were-above-average/#comment-1710 Wed, 03 Dec 2008 12:01:48 +0000 http://baselinescenario.wordpress.com/?p=1498#comment-1710 James, recently some empirical research has been done on managerial overconfidence. These studies have found managerial overconfidence to have significant effects on the firm’s financial policies. Malmendier and Tate classify CEOs as overconfident based on the way in which CEOs exercise their stock options, as well as looking at how the CEO is portrayed in the press (they have two separate measures). Ben-David, Graham and Harvey analyzed 5 years of forecasts by CFOs about stock market returns and confidence intervals from a regular survey of CFOs conducted by Duke University – they found that CFOs are “miscalibrated” on average (seems to be exactly the kind of research you were after).

Malmendier, Ulrike and Geoffrey Tate. “CEO Overconfidence and Corporate Investment,” Journal of Finance, 2005, v60, 2261-2700.

Malmendier U., Tate G. Who makes acquisitions? CEO overconfidence and the market’s reaction (2008) Journal of Financial Economics, 89 (1), pp. 20-43.

Malmendier, Ulrike, Tate, Geoffrey A. and Yan, Jonathan,Corporate Financial Policies with Overconfident Managers(November 2007). NBER Working Paper No. W13570.

BEN-DAVID, I., J.R. GRAHAM and C.R. HARVEY, 2007. Managerial Overconfidence and Corporate Policies. NBER Working Paper.

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