Thompson Rivers University

The Evolution of Overconfidence and Grade Expectations: An Observational Study

November 11, 2015

Dr. Hossain and Dr. Tsigaris research explores how grade expectations are formed by two groups of students as they progressively attempt to forecast their final grade. They first classify students who do not make significant forecast errors during the term as “good” forecasters. The other group contains students who are “poor” forecasters of their final grade. Both groups initially are overconfident and overestimate their final grade in the course. However, as more information becomes available about their actual performance, overconfidence falls. They find that both type of students initially put more weight on their initial beliefs than on their objective expectations. Students use adaptive expectation as a mechanism to form these beliefs. They adapt to previous forecast errors, gradually adjusting their expectations. But the poor forecasters continue to display adaptive expectations even after writing the final exam, but prior to receiving their final grade. They continue to anchor their beliefs in their initial expectations even after writing the final exam. On the other hand, the good forecasters eventually move from adaptive to rationally formed expectations. Their research was published in Journal of International Business.

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