BazEkon - The Main Library of the Cracow University of Economics

BazEkon home page

Main menu

Czerwonka Monika (Warsaw School of Economics, Poland)
Anchoring and Overconfidence : The Influence of Culture and Cognitive Abilities
International Journal of Management and Economics, 2017, vol. 53, nr 3, s. 48-66, tab., wykr., bibliogr. 65 poz.
Zeszyty Naukowe / Szkoła Główna Handlowa. Kolegium Gospodarki Światowej
Zachowania społeczne, Kultura
Social behaviour, Culture
JEL Classification: G02, C91
Anchoring and overconfidence are some of the best-known biases in psychology and behavioral finance literature. While a number of studies have investigated the evidence of these biases and explored the motives and human factors that contribute to the one's susceptibility to the effects, little is known about the cultural factors behind these heuristic biases. This paper aims to fill the research gap and shows the differences in proneness to the anchoring effect and overconfidence in two samples of students from Poland and India. The purpose of the study is twofold: to analyze susceptibility to behavioral effects relative to cultural background; and to consider the subjects' cognitive abilities as a potential factor in their exposure to behavioral biases and confirm that subjects with higher cognitive skills, measured by the cognitive reflection test (CRT) display less susceptibility to the above heuristic biases.(original abstract)
The Library of Warsaw School of Economics
Full text
  1. Acker, D., Duck, N. W. (2008), Cross-cultural overconfidence and biased self-attribution, The Journal of Socio-Economics, No. 37, pp. 1815-1824.
  2. Aggarwal, R., Goodell, J. W. (2014), National cultural dimensions in finance and accounting scholarship: an important gap in the literatures? Journal of Behavioral and Experimental Finance, No. 1, pp. 1-12.
  3. Antonczyk, R. C., Salzmann, A. J. (2014), Overconfidence and optimism: the effect of national culture on capital structure, Research in International Business and Finance, No. 31, pp. 32-151.
  4. Ariely, D., Loewenstein, G., Prelec, D. (2003), Coherent arbitrariness: stable demand curves without stable preferences, The Quarterly Journal of Economics, No. 118, pp. 73-105.
  5. Barber, B. M., Odean, T. (2001), Boys will be boys: gender, overconfidence, and common stock investment, Quarterly Journal of Economics, No. 116 (1), pp. 261-292.
  6. Bergman, O., Ellingsen, T., Johannesson, M., Svensson, C. (2010), Anchoring and cognitive ability, Economics Letters, No. 107 (1), pp. 66-68.
  7. Breuer, W., Quinten, B. (2009), Cultural finance, SSRN eLibrary, available at: (20.01.2015).
  8. Camerer, C., Lovallo, D. (1999), Overconfidence and excess entry: an experimental approach, The American Economic Review, No. 89 (1), pp. 306-318.
  9. Campitelli, G., Gerrans, P. (2013), Does the cognitive reflection test measure cognitive reflection? A mathematical modeling approach, Memory and Cognition, No. 42 (3), pp. 434-447.
  10. Cervone, D., Peake, P. K. (1986), Anchoring, efficacy, and action: the influence of judgmental heuristics on self-efficacy judgments and behavior, Journal of Personality and Social Psychology, No. 50, pp. 492-501.
  11. Chapman, G. B., Johnson, E. J. (1999), Anchoring, activation, and the construction of values, Organizational Behavior and Human Decision Processes, No. 79, pp. 1-39.
  12. Cheek, N. N., Norem, K. (2016), Holistic thinkers anchor less: exploring the roles of self-construal and thinking styles in anchoring susceptibility, Personality and Individual Differences, available at: (14.04.2016).
  13. Choi, I., Koo, M., Choi, J. A. (2007), Individual differences in analytic versus holistic thinking, Personality and Social Psychology Bulletin, No. 33, pp. 691-705.
  14. Chui, A., Titman, S., Wei, K. (2010), Individualism and momentum around the world, Journal of Finance, No. 65 (1), pp. 361-392.
  15. Critcher, C. R., Gilovich, T. (2008), Incidental environmental anchors, Journal of Behavioral Decision Making, No. 21, pp. 241-251.
  16. Czerwonka, M. (2014), The influence of religion on socially responsible investing, Journal of Religion and Business Ethics, No. 3 (1), p. 21.
  17. Daniel, K. D., Hirshleifer, D., Subrahmanyam, A. (2001), Overconfidence, arbitrage, and equilibrium asset pricing, The Journal of Finance, No. 56 (3), pp. 921-965.
  18. Duttle, K., Inukai, K. (2015), Complexity aversion: influences of cognitive abilities, culture and system of thought, Economic Bulletin, No. 35 (2), pp. 846-855.
  19. Englich, B., Mussweiler, T. (2001), Sentencing under uncertainty: anchoring effects in the courtroom, Journal of Applied Social Psychology, No. 31, pp. 1535-1551.
  20. Englich, B., Mussweiler, T., Strack, F. (2006), Playing dice with criminal sentences: the influence of irrelevant anchors on experts' judicial decision making, Personality and Social Psychology Bulletin, No. 32, pp. 188-200.
  21. Epley, N., Gilovich, T. (2001), Putting adjustment back into the anchoring and adjustment heuristic: differential processing of self-generated and experimenter-provided anchors, Psychological Science, No. 12, pp. 391-396.
  22. Epley, N., Gilovich, T. (2005), When effortful thinking influences judgmental anchoring: differential effects of forewarning and incentives on self-generated and externally provided anchors, Journal of Behavioral Decision Making, No. 18, pp. 199-212.
  23. Frederick, S. (2005), Cognitive reflection and decision making, Journal of Economics Perspectives, No. 19 (4), pp. 25-42.
  24. Frijns, B., Gilbert, A., Lehnert, T., Tourani-Rad, A. (2013), Uncertainty avoidance, risk tolerance and corporate takeover decisions, Journal of Banking and Finance, No. 37 (7), pp. 2457-2471.
  25. Furnham, A., Boo, H. Ch., (2011), A literature review of the anchoring effect, The Journal of Socio-Economics, No. 40, pp. 35-42.
  26. Galinsky, A. D., Mussweiler, T. (2001), First offers as anchors: the role of perspective-taking and negotiator focus, Journal of Personality and Social Psychology, No. 81, pp. 657-669.
  27. Gigerenzer, G. (1996), On narrow norms and vague heuristics: a reply to Kahneman and Tversky (1996), Psychological Review, No. 103 (3), pp. 592-596.
  28. Guiso, L., Sapienza, P., Zingales, L. (2006), Does culture affect economic outcomes? Journal of Economic Perspectives, No. 20, pp. 23-48.
  29. Hackbarth, D. (2008), Managerial traits and capital structure decisions, Journal of Financial and Quantitative Analysis, No. 43, pp. 843-882.
  30. Heaton, J. B. (2002), Managerial optimism and corporate finance, Financial Management, No. 31, pp. 33-45.
  31. Hofstede, G., Hofstede, G. J., Minkov, M. (2010), Cultures and organizations: software of the mind, 3rd Edition, McGraw-Hill Education, New York.
  32. Hoppe, E. I., Kusterer, D. J. (2011), Behavioral biases and cognitive reflection, Economics Letters, No. 110 (2), pp. 97-100.
  33. Jacowitz, K. E., Kahneman, D. (1995), Measures of anchoring in estimation tasks, Personality and Social Psychology Bulletin, No. 21, pp. 1161-1166.
  34. Jlassi, M., Naoui, K., Mansour, W. (2014), Overconfidence behavior and dynamic market volatility: evidence from international data, Procedia Economics and Finance, No. 13, pp. 128-142.
  35. Kahneman, D. (2011), Thinking fast and slow, Farrar, Straus and Giroux, New York.
  36. Kahneman, D., Tversky, A. (1996), On the reality of cognitive illusions, Psychological Review, No. 103 (3), pp. 582-591.
  37. Kahneman, D., Tversky, A. (1977), Intuitive prediction: biases and corrective procedures, available at:²/a047747.pdf (12.09.2015).
  38. Kahneman, D., Tversky, A. (1979), Prospect theory: an analysis of decisions under risk, Econometrica, No. 47 (2), pp. 263-292.
  39. Kahneman, D., Tversky, A. (1984), Choices, values and frames, American Psychologist, No. 39 (4), pp. 341-350.
  40. Klayman, J., Soll, J. B., Gonzalez-Vallejo, C., Barlas, S. (1999), Overconfidence: it depends on how, what, and whom you ask, Organizational Behavior and Human Decision Processes, No. 79 (3), pp. 216-247.
  41. Kwok, C., Tadesse, S. (2006), National culture and financial systems, Journal of International Business Studies, No. 37 (2), pp. 227-247.
  42. Larrick, R. P., Burson, K. A., Soll, J. B. (2007), Social comparison and confidence: when thinking you're better than average predicts overconfidence (and when it does not), Organizational Behaviour and Human Decision Processes, No. 102 (1), pp. 76-94.
  43. Levinson, J. D., Peng, K. (2007), Valuing cultural differences in behavioral economics, The ICFAI Journal of Behavioral Finance, No. 4 (1), pp. 32-47.
  44. Malmendier, U., Tate, G. (2005), CEO overconfidence and corporate investment, The Journal of Finance, No. 60 (6), pp. 2661-2700.
  45. Markus, H. R., Kitayama, S. (1991), Culture and the self: implications for cognition, emotion, and motivation, Psychological Review, No. 98, pp. 224-253.
  46. Moore, D. A., Healy, P. J. (2008), The trouble with overconfidence, Psychological Review, No. 115 (2), p. 502.
  47. Nisbett, R. E., Peng, K., Choi, I., Norenzayan, A. (2001), Culture and systems of thought: holistic versus analytic cognition, Psychological Review, No. 108, pp. 291-310.
  48. Nisbett, R. E., Masuda T. (2003), Culture and point of view, Proceedings of the National Academy of Sciences of the United States of America, No. 100 (19), pp. 11163-11170.
  49. Oechssler, J., Roider, A., Schmitz, P. W. (2009), Cognitive abilities and behavioural biases, Journal of Economic Behavior & Organization, No. 72 (1), pp. 147-152.
  50. Oskamp, S. (1965), Overconfidence in case-study judgments, Journal of consulting psychology, No. 29 (3), pp. 261-265.
  51. Pennycook, G., Cheyne, J. A., Koehler, D. J., Fugelsang, J. A. (2016), Is the cognitive reflection test a measure of both reflection and intuition? Behav Res Methods, No. 48 (1), pp. 341-348.
  52. Rzeszutek, M. (2015), Personality traits and susceptibility to behavioral biases among a sample of Polish stock market investors, International Journal of Management and Economics, No. 47 (1), pp. 71-81.
  53. Scheinkman, J. A., Xiong, W. (2003), Overconfidence and Speculative Bubbles, Journal of Political Economy, No. 111 (6), pp. 1183-1220.
  54. Siegel, J. I., Licht, A. N., Schwartz, S. H. (2011), Egalitarianism and international investment, Journal of Financial Economics, No. 102 (3), pp. 621-642.
  55. Soll, J. B., Klayman J., (2004), Overconfidence in interval estimates, Journal of Experimental Psychology. Learning, Memory and Cognition, No. 30 (2), pp. 299-314.
  56. Stewart, N. (2009), The cost of anchoring on credit-card minimum repayments, Psychological Science, No. 20, pp. 39-41.
  57. Toplak, M. E., West, R. F., Stanovich, K. E. (2011), The cognitive reflection test as a predictor of performance on heuristics and biases tasks, Memory & Cognition, No. 39, pp. 1275-1289.
  58. Toplak, M. E., West, R. F., Stanovich, K. E. (2014), Assessing miserly information processing: an expansion of the cognitive reflection test, Thinking and Reasoning, No. 20, pp. 147-168.
  59. Tversky, A., Kahneman, D. (1974), Judgment under uncertainty: heuristics and biases, Science. New Series, No. 185 (4157), pp. 1124-1131.
  60. Wang, M., Fischbeck, P. S. (2004), Similar in how to frame, but different in what to choose, Marketing Bulletin, No. 15, pp. 1-12.
  61. Yates, J. F., Lee, J.-W. (1996), Chinese decision making, in: M. H. Bond (Ed.), Handbook of chinese psychology, Oxford University Press, Hong Kong, pp. 338-351.
  62. Yates, J. F., Lee, J.-W., Shinotsuka, H. (1996), Beliefs about overconfidence, including its cross-national variation, Organizational Behavior and Human Decision Processes, No. 65, pp. 138-147.
  63. Yates, J. F., Lee, J.-W., Bush, J. G. (1997), General knowledge overconfidence: cross-national variations, response style and 'reality', Organizational Behavior and Human Decision Processes, No. 70, pp. 87-94.
  64. Zheng, X., El Ghoul, S., Guedhami, O., Kwok, C. C. Y. (2012), National culture and corporate debt maturity, Journal of Banking and Finance, No. 36 (2), pp. 468-488.
  65. Zingales, L. (2015), The "cultural revolution" in finance, Journal of Financial Economics, No. 117, pp. 1-4.
Cited by
Share on Facebook Share on Twitter Share on Google+ Share on Pinterest Share on LinkedIn Wyślij znajomemu