De La Salle University

School of Economics

MTSERCH Revision Sheet

Section: V24 Group Number: V247

Date Submitted: 10 DEC 2022

Dear Dr. Mariel Monica Sauler and Dr. Anne Marie Go,
MTSERCH Panel #1

We are pleased to report the summary of the revisions made in our project proposal entitled
“Influences of Information Asymmetry on Investor Overconfidence in the Stock Market.”
The group greatly appreciates your insightful comments and suggestions. We enumerated
below the main revisions performed in the manuscript:

Comments Responses from the Authors

Comment 1: “From Thank you so much for pointing this out. As suggested by its title,
what I understood the study mainly looks into how information asymmetries (i.e.,
about your variations in information quantity and quality) affects
presentation, your overconfidence scores. Initially, we had intended to use a 1×1
paper tries to do/ factorial experiment design and control quality, while varying only
achieve too much.” the quantity of information distributed. Adding how the quality of
information affects overconfidence was more of an afterthought
due to our acknowledgement of the fact that a person is affected
by both information quality and quantity. Hence, we assumed that
excluding information quality from our experiment and analysis
would likely decrease the significance of the paper.
It is true, however, that placing our interests in how investor
overconfidence affects trading behavior and performance in this
experimental stock market may be a stretch. This is especially so
since much literature already addressed this. Considering this, we
have entirely removed the third research question that asks, “What
is the effect of overconfidence on trading behavior and performance,
given asymmetric information in the stock market?”
 We also realize that, since the method consists of two sections (i.e.,
a questionnaire and a stock game), it may be more difficult to
accomplish contrary to our expectations, when considering time
constraints. Our group will discuss further on how we intend to
address this.

Comment 2: “ Your This is our mistake. Next time, we will be more mindful of the
presentation was not relevant things to present as well as the information presented in
informative enough the powerpoint. However, given the limited time we had, with the
for us to comment on vast information our paper presented, we initially concluded that
and critique your being simple was the way to proceed. Thank you for your comment,
research papers” and we will take note of this the next time we are going to present.

Comment 3: “i dont Deafening silence

understand your
methods”

Specific comments raised by each panelist are discussed bellowed, followed by our responses.

Comments from Dr. X

Spelling errors in p, 12 lines 17 to 19 Corrected and the document has been

spell-checked all throughout.

The document is full of complex and We have checked for style and readability,
unreadable statements. and have used Grammarly to simplify
sentences.

Comments from Dr. Y

Model is incorrectly typed with the wrong Revised as pointed out.

subscripts and greek letter notation

Some paragraphs are not properly indented Done, revised.

Again, thank you for spending time with us during the MTSERCH conference.

Thank you very much, and we hope you have a great term break ahead!

Sincerely,

He, Adel John

Huan, Glenn Rafael
Manalo, Margeaux Thereza
Manaloto, Giro Miguel
Influences of Information Asymmetry on Investor Overconfidence in the Stock Market

Presented to the School of Economics

De La Salle University - Manila
1st Term, A.Y. 2022-2023

In partial fulfillment of
the course requirements for
Research Methods in Economics V24
1st Term, A.Y. 2022-2023

Submitted by
He, Adel John
Huan, Glenn Rafael
Manalo, Margeaux Thereza
Manaloto, Giro Miguel

Submitted to
Alinsunurin, Jason Pilapil

October 28, 2022

ABSTRACT
Despite the numerous research on overconfidence, little is known about the influences of the
imbalance of information on it. Our paper extends the literature on behavioral finance by investigating
how the disparities in the quality and quantity of information could affect investor confidence
(miscalibration and better-than-average effect). Using an experimental approach, a stock market
simulation with a minimum of 270 students in economics, finance, or management would be tested for a
market simulation in which they would be asked to answer a questionnaire and participate in a stock
game. The study will utilize analysis of variance (ANOVA) to compare the difference of means between
the five groups with different quality and quantity of information.
TABLE OF CONTENTS

ABSTRACT 2

TABLE OF CONTENTS 3

CREDIT DECLARATION 4

CHAPTER 1. INTRODUCTION 5
Research Questions 6
Research Objectives 6

CHAPTER 2. REVIEW OF RELATED LITERATURE 6

Overconfidence bias 6
Information asymmetry 8

CHAPTER 3. THEORETICAL AND CONCEPTUAL FRAMEWORK 8

Bounded Rationality 8
Winner’s Curse 9
Overchoice 9

CHAPTER 4. DATA AND METHODOLOGY 10

Sample and Data Collection 10
Model Specification 12
Variable Specification 12
Robustness Checks 13

REFERENCES 13

LIST OF CONTRIBUTIONS 15
CREDIT DECLARATION
This section acknowledges the contribution of specific individuals who have assisted the authors
throughout the fruition of this paper.
First and foremost, we would like to thank Dr. Jason Alinsunurin for being incredibly patient and
understanding of the group's attempts to understand the nature of experimental research designs. We
would also like to thank our two dearest panelists, Dr. Mariel Sauler and Dr. Anne Go, for their valuable
insights and comments on our paper and presentation that have opened room for more improvement
and possibilities. Lastly, we would like to grant our deepest appreciation to Dr. Largoza. His knowledge
and wisdom in behavioral finance have guided us immensely for this paper and moving forward.
 CHAPTER 1.
INTRODUCTION
Behavioral finance captures the subtle nuances of investor traits as opposed to the assumptions
made by classical theories of economic behavior. Recent seminal works on behavioral finance have
assisted in further understanding how economic decisions were made. The assumption of a purely
rational investor in the financial market has recently been challenged, and it could generally be argued
that most rational investors are affected by psychological factors and behavioral traits. These “rational”
traders tend to trade excessively, base their trading decisions on “gut” feeling, being led by trending
market sentiments without ever considering their personal opinion, and are also prone to the disposition
effect (Shah et al., 2018). Therefore, behavioral finance attempts to explain the shift in the theoretical
paradigm where there is a conflict between the actual decision made and the optimal move being
heralded by classical economists (Abdin et al., 2022).
Previous literature based it on the assumption that individuals are “bounded rationally,”
meaning that humans hold a certain threshold to information processing, which would prevent them
from forming economically rational behavior (Itzkowitz & Itzkowitz, 2017 in Admad, 2021). The cognitive
system often addresses the limit to the number of information humans can process by utilizing heuristics
(shortcuts) designed to simplify the decision-making process, which could often lead to unsatisfactory
results (Tversky & Kahneman, 1973 in Admad, 2021). The paper attempts to capture one of the
psychological biases affecting investment decisions in the stock market: overconfidence.
Overconfidence bias is one factor that explains why some investors underperform consistently,
despite having theoretical knowledge of how the stock market operates. It is commonly defined as the
overestimation of an investor’s knowledge, abilities, the accuracy of the information, or the overly
optimistic view of the future. Pieces of literature in the past have provided evidence that overconfidence
could cloud proper financial planning and economic decisions (Sandroni & Squintani, 2013). Glaser and
Weber (2007) find evidence that increasing overconfidence (better-than-average effect) could affect
trading volume by increasing it. This supports theoretical models that imply that overconfident investors
are also more prone to trading than other investors due to the incentive of a higher return (Abdin et al.,
2022; Odean & Barber, 2001). This high trading volume could only be described by DeBondt and Thaler
(1995) as “the most embarrassing fact to the standard finance paradigm.” On the other hand, empirical
findings suggest that overconfidence (miscalibration) affects trade performance rather than volume
(Glaser & Weber, 2007). When put into the context of the stock market, overconfidence is a bias related
to the irrational valuation of a stock and holding on to its beliefs on it. This bias could often lead to
inefficient markets and poor performance (Abdin et al., 2022).
Such effects on individual decisions and market efficiency depend partly on market information
distribution (Odean, 1998). The bounded rationality theory supports this, suggesting that limited
information, alongside limited time and cognitive limitations of the mind, causes agents to make
irrational decisions (Simon, 1955; Ahmad, 2020). Additionally, despite the assumption of perfect
information among centuries worth of formal economic models, decisions are influenced not only by
freely acquirable public information but also by private information that is not as easily accessed by the
public. These occurrences in which a party holds more or better information than others, referred to as
information asymmetry, exist simply because “different people know different things'' (Stiglitz, 2002).
Information asymmetries can hence be expected to have implications on overconfidence.
This study investigates the effects of information asymmetry on overconfidence. It empirically
tests whether possessing more information or better quality of information will always benefit an
investor in the stock market. The empirical findings will thus be of interest to individuals who expend
resources to purchase investment information. This study additionally attempts to answer the
overarching question posed in behavioral finance, and provide further explanation for the deviation of
investor decisions from rationality and the inefficiency of markets by extending the line of research on
behavioral biases and overconfidence. Sufficient research has been conducted on the influences of
information and overconfidence on economic decisions; however, few investigate with overconfidence
measures as the variable of interest or are done in the context of emerging markets. The novel
contribution it offers to the body of existing literature is an investigation into the implications of
information asymmetry on investor overconfidence in the case of the Philippine stock market.

Research Questions

1. How does the quantity and quality of information that a stock market investor possesses
influence their measures of overconfidence?
2. Do the quantity and quality of information a stock market investor possesses influence their
measures of overconfidence differently?

Research Objectives

1. To investigate the relationship between information asymmetry and measures of overconfidence

in a stock market.
2. To investigate the effect of overconfidence on trading behavior and performance in a stock
market with information asymmetries.

CHAPTER 2.
REVIEW OF RELATED LITERATURE

Overconfidence bias

Investment decisions are influenced by various factors derived from investor behavior and the
amount of information they hold. Brooks and Willams (2021), in assessing how personality traits affect
investment decisions and behavior towards risk, examined the effects of the Big Five personality traits,
namely experience, extraversion, neuroticism, conscientiousness, and agreeableness. Their study argued
that these traits have a degree of descriptive influence with their effect on individual risk tolerance
scores, as well as investment decisions of individuals. Furthermore, it was a point that certain emotions
and personality traits are related, with different types of personalities leading to a tendency to manifest
behavioral biases (Brooks & Williams, 2021). The findings of Sadi et al. (2011) have shown that these five
personality traits could explain how investment decisions are not limited to emotions and traits, as
information plays a crucial role. A prime example of this would be extraversion, paired with a certain
level of information, which usually leads to overconfidence in predicting future market outcomes (Pan &
Statman, 2012).Gabaix and Laibson (2000) have developed and tested a boundedly rational decision
model that can make quantitative behavioral predictions and is broadly applicable and empirically
testable. Their data overwhelmingly reject the rational model. When personalities and emotions are
considered, human behavior may frequently turn from bounded rationality to irrationality, mainly due to
manifestations of behavioral biases.
Numerous studies have been conducted on behavioral bias—overconfidence—which is often
used as an umbrella term to flexibly explain phenomena where individuals overestimate knowledge,
abilities, the accuracy of the information, or the overly optimistic view of the future. According to
McCannon et al. (2016), although the findings of their experiment show that investor confidence usually
leads to a positive impact on investment decisions wherein it leads to higher returns, hasty and improper
assessment of one’s knowledge due to overconfidence could potentially lead to individuals bypassing
risks associated with financial decisions, subsequently leading to undesirable outcomes such as losses
and suboptimal returns. Pikulina et al. (2017) state that bias generally leads individuals to ignore the risks
associated with investment and become too confident about their skills and knowledge as they hold
themselves to a high level. However, the concept of overconfidence contains multiple definitions,
requiring researchers to specify the form of overconfidence being considered and the method used in
measuring such (Olsson, 2013). Thus, overconfidence literature often extensively explores certain
manifestations of overconfidence. Seraj et al. (2022), for example, describe overconfidence as an “overly
positive self-assessment of ability.” Ae et al. (2007) examined the “better-than-average effect,” wherein
people judge themselves as better than others regarding skills or general personality attributes.
Lichtenstein et al. (1982) investigate overconfidence as miscalibration. Calibration literature refers to
calibration as the match between confidence and accuracy; hence, a discrepancy between confidence
and accuracy signals miscalibration (Alba & Hutchinson, 2000).
In applying overconfidence concepts to the financial markets, miscalibration theoretical models
developed, for example, by Gervais and Odean (2001), imply that a higher degree of overconfidence
leads to higher trading volume. Barber and Odean (2000) verify this with their results showing that men,
who possessed greater overconfidence, traded more frequently than women. Menkhoff et al. (2013)
empirically tested these implications as well, concluding that although their measures of miscalibration
showed no relationship with annual portfolio turnover, higher degrees of miscalibration may lead to
inferior investment decisions. Biais et al. (2005) likewise find that miscalibration reduces trading
performance in the experimental asset market; however, their miscalibration measures showed no
relation to a trading frequency—an opposite result to some theoretical models and empirical findings.
Conversely, findings on the better-than-average effect have shown that investors who perceive
themselves as higher than average tend to have a certain degree of financial knowledge or financial
literacy that contributes to their overconfidence, affecting their investment decisions so that they would
trade more (Ae et al., 2007). Glaser and Weber (2003) confirm this, showing that measures of the
better-than-average effect predicted trading frequency. The study of Pikulina et al. (2017) that assessed
investment decisions born from overly confident investors who think they are better than average can be
attributed to the amount of knowledge they have.
Recent studies have touched on overconfidence and financial literacy; it is generally argued that
most investors, even with a good amount of knowledge, tend to act irrationally regarding investment
decisions due to the miscalculation of risk. Similarly, the amount of information that an investor has is a
factor that enables them to make rational investment decisions; however, with a certain degree of
knowledge, irrationality, as suggested by the previous studies that assessed the behaviors of investors,
usually comes in the form of such a behavioral bias.

Information asymmetry
Information asymmetry has been a prevalent topic in economics and finance literature,
particularly in behavioral economics, as it affects the decision-making behaviors of those concerned
(Connelly, Certo, Ireland, et al. 2011a). The reason for its influence is that some parties would hold
private information (which is not readily available to the public) that could grant the said party
advantages due to it leading to better decision-making. Assumptions made by classical economists
largely ignore information asymmetry, opting for a market with perfect information. However, despite
this, most classical economic models have limited utility when providing insights into how the markets
function (Connelly, Certo, Ireland, et al. 2011b).
Regarding information asymmetry, there are two broad aspects where asymmetric information is
crucial. Stiglitz's (2000) primary interest was disparities in intent and quality of information. Asymmetric
information on intent relates to how one party knows little about the behavioral intentions of the other
party. On the other hand, the second case is concerned with one party having little knowledge of the
“characteristics” of the other party (Connelly, Certo, Ireland, et al. 2011c). Information quality is much
more important in this paper than the party's intent. This is because the quality and quantity of
information are factors influencing investments. These indicators show a publicly traded company's
performance and are essential for investors to increase confidence. From the belief-updating model by
Hogarth and Einhorn (1992), the quality and quantity of crucial information does not influence the
progression of updating beliefs but is a determinant of confidence and overconfidence (Tsai et al., 2008).
Informational efficiency pertains to prices determined in the market with full knowledge and
information available to the public (Park & Chai, 2020). This information efficiency can only be achieved
when the same information is given to all traders swiftly and cost-effectively. However, this is not always
the case, people do not have the same information, and these individuals take different actions and have
contrasting views on the precision of the information. Information asymmetry appears when a particular
group of investors has an unfair way of obtaining and fabricating information which will skew investors'
wealth toward the insiders' pockets (Bouchaud et al., 2009).

CHAPTER 3.
THEORETICAL AND CONCEPTUAL FRAMEWORK

Bounded Rationality
According to Simon (1997), the term bounded rationality is a means to designate rational choice
that considers the human's cognitive limitations mind and the capacity to understand the
decision-maker. Simon (1997) expounded that in the behavioral approach to finance and economics,
bounded rationality is a central theme, as it shows regard to how the decision-making process of
individuals influences or affects the actual decisions of investors, the market, or consumers. Adopting
this theory for the study, Bounded Rationality would be instrumental in assessing investor behavior and
considering their cognitive limitations on knowledge and prediction capability of human decision-making
behaviors. In theory, bounded rationality (Tuyon & Ahmad, 2017) shows that both rational and irrational
elements are ingrained in all decision-making processes of individuals.
Conlisk (1996) provided fundamental justifications for the study of associating and incorporating
bounded rationality in assessing behavior relative to financial decisions. The first reason was that
bounded rationality is empirically crucial because, according to Conlisk (2006), there have already been
extensive studies and experiments in which there have been manifestations of behavioral biases and
miscalibration of abilities and capacity for information as a common theme in these findings. An
experimental study by Peng & Xiong (2006) has shown that the overconfidence bias is more apparent in
tasks that require more complex judgments. Furthermore, they used the fundamental valuation of
financial securities as an example of this difficult task, which becomes even more complicated when
investors have limited attention. Peng & Xiong (2006) modeled overconfidence as the exaggeration of
the investor’s information-processing ability in quantity. As a result, the investor overestimates the
precision of their information in a way consistent with other overconfidence models in the literature.
Behavioral approaches in finance and economics have already integrated bounded rationality
into their models to describe and assess economic, investment, or market behaviors. Furthermore,
cognitive limitations “must be treated as a scarce resource”(Conlisk, 1996).

Winner’s Curse
In the context of finance, the winner's curse is a concept derived from game theory, wherein it is
described as a tendency for the winning bid in an auction to exceed the true value of a particular security
or stock. This occurrence is extremely common with Initial Public Offerings, wherein market prices are
initially absent, and chances for potential overestimation of the stock’s value are heightened. This
concept is mainly attributed to incomplete information and behavioral biases, which can incite irrational
decisions. Adopting this concept for the study will aid the assessment of the relationship between
information asymmetry and the overconfidence of an investor.
In a paper by Thaler (1988), the winner of a bid can be "cursed" in two possible ways: (1) the
winning bid exceeds the intrinsic value of the item; as a result, the bidder suffers losses; or (2) the
intrinsic value of the item is less than the estimate of a consultant or an expert; therefore, the winning
firm is not satisfied. Thaler (1988) called these winners' curse versions 1 and 2, respectively. Thaler
(1988) then mentioned that In either version of the curse, the winner of the bid would be unhappy
about the outcomes of both scenarios.

Overchoice
Overchoice is a phenomenon that has been studied for decades. It is a cognitive hindrance in
which individuals have difficulty deciding on numerous options because of the many possible outcomes
and risks of making the wrong choice (Iyengar & Lepper, 2000). Too many options create more cognitive
stress and confusion from information overload. The outcomes could lead to poor decisions and even
non-decision (Mittal, 2016).
 CHAPTER 4.
DATA AND METHODOLOGY

Sample and Data Collection

The study gathers primary data from an experimental market with information asymmetries
using a questionnaire and games simulating Philippine stock markets from previous years. Specifically,
socioeconomic data as well as data on their trading behavior, trading performance, and overconfidence
scores are collected using the questionnaire and the experimental stock with information asymmetries
market from a sample comprised of a minimum of 270 students in economics, finance, or management.
Subjects are given equal monetary incentives for participation.

The Questionnaire
Survey. A survey is conducted on the experiment subjects using the questionnaire distributed to them
before they participate in the trading game. This allows the experimenters to gather socioeconomic data
that may be useful to the research from the subjects using the following questions:
● Age (18< …)
● Gender (Male, Female or LGBTQ)
● School (e.g., DLSU)
● Educational Attainment (e.g., Undergraduate)
● Course (e.g., BS Applied Economics major in Financial Economics)
● Investment experience (0-1 year, 2-4 years, 4-6 years, 7-9 years, >9 years)

Judgment tasks. We follow Biais et al. (2005) and measure the overconfidence scores of the subjects
before they participate in the stock game with information asymmetries through knowledge calibration
tasks and better-than-average tasks. The former consists of 10 general knowledge questions and 10
finance or economics questions (i.e., 5 knowledge questions and 5 stock market forecast questions) with
unambiguous answers, such as: “What is the diameter of the moon in miles?” and “Which country has a
population with a higher mean life expectancy?” For each question, subjects either:
● Provide a lower and upper limit such that they are 90% sure that the actual value will fall
between their two specified values (i.e., a confidence interval task), or
● Select one of two choices and report the probability that their selected answer is correct on a
scale of .5 to 1 (i.e., a half-range task).
The questions are not all connected to economics, as doing otherwise may cause biased results. The
better-than-average tasks involve the subject evaluating own performance in comparison to the others
like so:
● Provide a number representing the percentage of people who performed better (e.g., at
identifying stocks with above average performance in the future based on the given) on a
scale of 0 to 100% (or 0 to 1).

The Game
Rules of the game. Communication occurs mainly between players and the experimenters, and contact
between players is minimized during the simulation. Public and private information, shares, and currency
are provided at the start of each replication. They are also given sealed bids for the first round and two
forms, where they write their orders, trade records, inventory, and cash balances during each round (i.e.,
the opening call and the continuous market). Public information to be presented to all players include
the game's rules, the stock charts, the market, and the final prices of shares, as well as the fact that
some players possess trading experience while others do not. The experimental stock charts are
modeled after an actual stock in the Philippine stock market; however, this fact and the stock symbol of
the actual stock that the experimental stock is modeled after are not revealed to the subjects. This will
be replaced by an alphabetical naming scheme, namely “Stock A,” “Stock B,”..., etc. As in the Philippine
Stock Exchange (PSE), players can place market or limit orders to buy/sell shares but are not allowed to
short-sell. The buy/sell orders for shares made by the players are kept confidential.
Before the game's simulation, a practice round will be conducted if needed. In the first round of
each replication, players will receive non-redundant private information related to the presented stock
that they must keep secret. The quantity and quality of the distributed private information will depend
on the group the subject is assigned to. To simulate a pre-open in the PSE, players place their buy/sell
orders through sealed bids submitted to the experimenters and are allowed to cancel or modify orders;
however, no matching orders occur until the end of the round. At the end of the pre-open, players are
given forms containing judgment tasks that are related to the ongoing experimental trading game with
information asymmetries (for overconfidence estimation):
● (Miscalibration, half-range task) Will the price of the stock increase or decrease? State a value
from 50% to 100% (probability .5 to 1) that represents how certain you are of your answer.
● (Miscalibration, confidence interval task) Provide a minimum and maximum price in which you
are 90% confident that the stock's actual price will fall between your two specified values.
● (Better-than-average task) How good is your investment performance compared to others in the
experiment? Provide a number representing the percentage of participants with higher returns
than you during the experiment on a scale of 0 to 100% (or 0 to 1).
As players submit these forms after confirming their completion, the experimenters reveal the opening
price of the share. All players with matched orders will receive execution reports. All limit sell orders
placed at prices less than or equal to the revealed value are executed at that price. If matching does not
occur, instead of the pending order being lined up in the order book for the stock, it is automatically
canceled for simplicity. In the second round, players announce offers to buy/sell the share to simulate a
continuous market. Sell orders placed at prices less than or equal to those placed by an open buy order
are automatically executed at the buy order’s price (i.e., the “best price,” as per the PSE trading rules).
Players may also call to attention the orders that have not been executed yet. The second round ends
once 7 minutes have passed, and players are again given forms to answer the same judgment tasks. As
players submit these forms after confirming their completion, the experimenters reveal the final price of
the share, which the players will use to compute their final portfolio value. This is calculated by
multiplying the number of shares you own at the end of the replication by the final price of each share.
This stock trading game is replicated 4 times, after which players will calculate their final wealth
value that is equal to their initial cash, plus the proceeds from their share sales, less the cost of their
share purchases, plus the final value of their portfolio. Data on their trading behavior, trading
performance, and overconfidence scores, given information asymmetries, are collected using this
experimental stock market.

Model Specification
Analysis of variance (ANOVA) is a tool used to compare the difference of means between the five
groups with different quality and quantity of information: low quality & low amount, low quality & high
amount, high quality & low amount, high quality & high amount and control group (without
information).

Variable Specification
Dependent variables. The variable of interest in this study is investor overconfidence. We measure the
overconfidence of participants using judgment tasks to measure accuracy, confidence, and
(mis)calibration and the better-than-average effect (BTAE henceforth).
Some measures of confidence, accuracy, and/or calibration are developed using three
experimental paradigms in calibration literature, with the assumption that these are ordinally consistent
with the beliefs of the subject regarding accuracy. This study focuses on the subjective probability
paradigm, as tasks using this experimental paradigm measure accuracy and confidence on the same
scale, allowing for correlation between the two. Additionally, assessing under- and overconfidence is
made possible through direct comparisons between subjective and objective probabilities. Subjective
probability tasks involve providing subjects with questions with unambiguous answers and instructing
them to provide a number using a response scale to represent their belief that their specified answer is
the correct answer (i.e., a subjective probability rating of being correct). This study uses half-range tasks
and confidence interval tasks. The former measures accuracy as the average percent correct (or the
objective probability, i.e., the proportion of correct predictions), confidence as the average stated
subjective probability of being correct, and the overconfidence score as the difference between
confidence and accuracy (Tsai et al., 2008; Alba & Hutchinson, 2000). The mean subjective probability
exceeding the mean proportion correct signals overconfidence. On the other hand, the overconfidence
score in confidence interval tasks is measured as the proportion of questions for which the true answers
fall outside the specified range (Biais et al., 2005).
In measuring the better-than-average effect, we follow a procedure similar to Glaser and Weber
(2003) and give better-than-average tasks that involve evaluating one's performance compared to the
50−𝑎𝑛𝑠𝑤𝑒𝑟
others. Their overconfidence scores are calculated as 50
, in which a resulting ratio less than or
equal to 1, and yet more than 0 will signal overconfidence.

Independent variables. The key independent variable in this experiment is private information, which is
further classified into low- and high-quantity information, and low- and high-quality information in terms
of validity (i.e., low-quality information contains salient, attention-grabbing information that overvalues
cases, anecdotes, extreme realizations, and overweight irrelevant data, rather than relevant, statistical,
and base-rate information (Odean, 1998)). These are crossed for a 2×2 factorial, between-subjects
design as follows:
 Low amount High amount

Low-quality Low-quality, low amount Low-quality, high amount

High-quality High-quality, low amount High-quality, high amount

A priori expectations for key independent variables.

a. Positive correlation between the quantity of information and miscalibration
a. Positive correlation between the quality of information and miscalibration
b. Positive correlation between the quantity of information and better-than-average effect
c. Positive correlation between the quality of information and better-than-average effect

Robustness Checks
The reliability and internal consistency of a measurement scale can be attested for when
repeated measurements consistently produce identical results under the same conditions, which may be
assessed by finding the Cronbach alpha (DeCoster, 2000; Biais et al., 2005) Moss et al (1993) state that,
while a coefficient alpha of 0.6 is deemed acceptable, the threshold of 0.7 is more widely recognized.

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