In two studies, stock market professionals (N1 = 22, N2 = 21) and laypeople (N1 = 29, N2 = 34) provided thirty-day forecasts for twenty stocks and estimated the size of their own errors as well as their own and the other group's mean errors. Both groups predicted that the errors made by professionals would be half the size of the errors made by laypeople. In reality, the errors of both groups were about the size predicted for the laypeople. Participants also estimated their ability to pick the best performing stock from two options. Both groups proved to be overconfident. Professional predictions were only successful 40% of the time, a performance below what could be expected from chance alone. Self reports and correlations between forecasts and price movements suggested that the professionals based their predictions on specific information of the stocks without sufficient awareness of the unreliability of this information, while the laypeople used simple heuristics based on previous price movements.
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