Journal of Behavioral and Experimental Finance 5 (2015) 27–34 Contents lists available at ScienceDirect Journal of Behavioral and Experimental Finance journal homepage: www.elsevier.com/locate/jbef Full length article Lay people beliefs in professional and naïve stock investors’ proneness to judgmental biases Daniel Peterson, Anders Carlander, Amelie Gamble, Tommy Gärling * , Martin Holmen University of Gothenburg, Göteborg, Sweden article info Article history: Received 3 November 2014 Received in revised form 29 January 2015 Accepted 7 February 2015 Available online 18 February 2015 JEL classification: D14 D18 G02 G21 Keywords: Belief Judgmental bias Stock investor Expertise Trust abstract We hypothesize that lay people due to over-reliance on expertise have unwarranted beliefs in professional stock investors’ skill, which may be one reason why they trust financial institutions. In order to investigate this hypothesis, survey questions were constructed to measure whether lay people beliefs in professional stock investors differ from naïve stock investors in making more rational and less biased judgments. Study 1 showed that both economics undergraduates (n = 118) and psychology undergraduates (n = 72) believe that professional stock investors are more rational and overconfident than naïve investors, but less optimistically biased, less influenced by affect, and less influenced by others. Similar results were obtained in Study 2 comparing a random population-based sample (n = 178) to a heterogeneous undergraduate sample (n = 186). © 2015 Elsevier B.V. All rights reserved. 1. Introduction In many domains experts frequently fail to make more accurate judgments than novices do (Camerer and Johnson, 1991; Ericsson et al., 2006). It is still generally believed among finance researchers that professional stock investors owing to their expertise are not prone to biased judgments (e.g. Dufwenberg et al., 2005 and Fama, 1998). In the present study we investigate whether lay people hold the same belief. If they do, it may be one reason why they trust financial institutions. Several judgmental biases have been demonstrated among stock investors (e.g. Gärling et al., 2009, Glaser * Correspondence to: Department of Psychology, University of Gothen- burg, P.O. Box 500, 40530 Göteborg, Sweden. Tel.: +46 31 786 1881; fax: +46 31 786 4628. E-mail address: Tommy.Garling@psy.gu.se (T. Gärling). et al., 2004 and Hirshleifer, 2001), including overconfi- dence, optimism bias, affect influences, and social influ- ences. We suggest that these judgmental biases are consis- tent with lay people’s naïve theories (Wegener and Petty, 1997) based on observations of themselves and other lay people. Yet, lay people may have more favorable beliefs about professional stock investors of whom they have a limited experience. These more favorable beliefs may stem from an over-reliance on expertise (Huber et al., 2010). If believing in investor expertise is unwarranted, lay people may act in irrational ways when taking expert ad- vice, for instance in contacts with banks and other finan- cial institutions. In support Carlander et al. (2013) observed that people preferred actively managed mutual funds for long-term savings if they trusted professional investors’ skill, whereas people who did not have the same trust in professional investors’ skill preferred index funds or sav- ings accounts. We next briefly review evidence in support http://dx.doi.org/10.1016/j.jbef.2015.02.002 2214-6350/© 2015 Elsevier B.V. All rights reserved.