2. Hypothesis development
In this section, we present our theoretical motivation for investigating the short-term dynamics of managerial forecasts.
We first describe the underlying theoretical foundation, which is based on the two main principles of self-attribution and
‘‘static’’ overconfidence, and then describe their interaction in a unified framework.
2.1. Theoretical foundation
The basic premise of this study is that individuals do not always update their beliefs in a Bayesian fashion. Instead, they suffer
from various types of bias that may lead them to an inaccurate perception of their own skills. We examine some of these types of
bias and specifically consider on the two psychological principles of self-serving attribution and ‘‘static’’ overconfidence