DESIRABILITY BIAS AMONG PROFESSIONAL INVESTMENT MANAGERS - SOME EVIDENCE FROM EXPERTS

Desirability bias is the tendency to overpredict desirable outcomes an d underpredict unwanted outcomes. Previous research suggests that this bias is quite pervasive among non-experts but there is very scant evi dence of its intensity among experts. For at least twenty years, finan cial academics and, to a lesser extent, practicing investment managers have claimed that the financial markets are among the most efficient and bias free in existence. Therefore, this paper examines the degree of desirability bias among expert and practicing US and Taiwanese inve stment managers. The empirical results suggest that desirability bias does appear to be a characteristic of these experts. (C) 1997 by John Wiley & Sons, Ltd.