Exponential-Growth Bias and Long-Run Investment Decisions

Exponential-growth bias is the tendency for individuals to underestimate exponential growth due to neglecting the role of compounding. We run an online study to measure the extent of exponential-growth bias in a representative sample of the U.S. population. We measure the effects of a simple graphical intervention on the bias. We run a laboratory study on students to measure both the bias and the extent of overconfidence in answering the questions. We find both a large bias and overconfidence