More Information=More Confidence=More Problems

////More Information=More Confidence=More Problems

More Information=More Confidence=More Problems

By |2017-08-18T17:00:09+00:00April 16th, 2013|Behavioral Finance|7 Comments

Effects of amount of information on judgment accuracy and confidence

  • Claire I. Tsai, Joshua Klayman, Reid Hastie
  • A version of the paper can be found here.
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When a person evaluates his or her confidence in a judgment, what is the effect of receiving more judgment-relevant information? We report three studies that show when judges receive more information, their confidence increases more than their accuracy, producing substantial confidence–accuracy discrepancies. Our results suggest that judges do not adjust for the cognitive limitations that reduce their ability to use additional information effectively. We place these findings in a more general framework of understanding the cues to confidence that judges use and how those cues relate to accuracy and calibration.

Data Sources:

Survey Evidence

Alpha Highlight:

Empiritrage has a detailed report here


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About the Author:

After serving as a Captain in the United States Marine Corps, Dr. Gray earned a PhD, and worked as a finance professor at Drexel University. Dr. Gray’s interest in bridging the research gap between academia and industry led him to found Alpha Architect, an asset management that delivers affordable active exposures for tax-sensitive investors. Dr. Gray has published four books and a number of academic articles. Wes is a regular contributor to multiple industry outlets, to include the following: Wall Street Journal, Forbes,, and the CFA Institute. Dr. Gray earned an MBA and a PhD in finance from the University of Chicago and graduated magna cum laude with a BS from The Wharton School of the University of Pennsylvania.


  1. […] More information=more confidence=more problems.  (Turnkey Analyst) […]

  2. Adam Butler April 16, 2013 at 1:13 pm

    So true and SO IMPORTANT!! More information more accuracy.

    One of Ed Seykota’s students once told a story about a lesson Ed taught him early in his career. The student offered Ed a story about why prices were moving up or down one day.

    Ed looked at the student for a minute and then pulled out a deck of cards. He shuffled them and then dealt one card, face down on the table. Then he said, “What card is this?”, to which the student stuttered, ‘Uh, I dunno.”

    So Ed made everyone leave the room, and instructed the student to spend an hour thinking about what might be on the card. Ed came back an hour later and asked the student if he’d made any progress. Of course, he hadn’t (couldn’t!), but Ed had made his point.

    The future, and markets (and especially the future of markets) are completely unknowable – the best we can do is observe and react intelligently.

  3. […] information will somehow give us an “edge.” The challenge with this thinking is that more information may increase the confidence in our decisions but it does little to increase their accuracy. I would argue that it isn’t the latest […]

  4. […] information will somehow give us an “edge.” The challenge with this thinking is that more information may increase the confidence in our decisions but it does little to increase their accuracy. I would argue that it isn’t the latest […]

  5. […] Humans get overconfident and overoptimistic. They typically develop an idea and come to a conclusion. Humans collect more and more information and get more and more confident in their conclusion, however, the accuracy of their conclusion never improves. A summary of a study highlighting this empirical observation can be found here: […]

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