Heritability of Overconfidence

David Cesarini, Magnus Johannesson, Paul Lichtenstein, Björn Wallace

    Research output: Contribution to journalArticlepeer-review

    Abstract

    Empirical evidence suggests that people on average overestimate their own ability in a variety of circumstances. Little is known, however, about the origins of such overconfidence. To shed some light on this issue, we use the classic twin design to estimate the genetic and environmental contributions to individual differences in overconfidence. We collect data on overconfidence among 460 twin pairs. Overconfidence is measured as the difference between the perceived and actual rank in cognitive ability. Cognitive ability is measured using a 20-minute test of general intelligence. We find a highly significant joint effect of genes and common environment, but our estimates of the relative contributions of genetic and common environmental variation are less precise. According to our point estimates, genetic differences explain 16-34% of the variation in overconfidence depending on the definition of overconfidence used and common environmental differences explain 5-11%. (JEL: C91, D87, Z13).

    Original languageEnglish (US)
    Pages (from-to)617-627
    Number of pages11
    JournalJournal of the European Economic Association
    Volume7
    Issue number2-3
    DOIs
    StatePublished - Mar 2009

    ASJC Scopus subject areas

    • Economics, Econometrics and Finance(all)

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