Overconfidence over the lifespan: Evidence from Germany

Abstract

This paper investigates if and how overconfidence at the individual level changes over the course of a life. We provide age profiles of a novel continuous overconfidence measure and the probability of being overconfident, conditioning on personality traits (including the Big 5 and optimism), economic preferences, cognitive ability, and the individual’s socio-economic status. Our empirical work relies on representative panel data sets from Germany, and individuals’ both self-assessed and actual percentile in the monthly gross wage distribution are incorporated in our measure of overconfidence. We find that both the level of relative placement and the overplacement probability increase with age up to one's fifties.