How do investors behave in the context of a market crash? Evidence from India

Mushinada, Venkata Narasimha Chary

doi:10.1108/ijoem-05-2019-0357

Cited by 16 publications

(10 citation statements)

References 79 publications

(111 reference statements)

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“…The results of overconfidence bias and market return volatility shows that overconfidence of market players contributed to the observed volatility on GSE during the Covid-19 pandemic period. Our findings are quite similar to the ones presented by Abbes (2013), Jlass et al (2014) and Mushinada (2020), which imply investors overreact to private information and underreact to available public information and as result become overconfident and contribute. Therefore, there is empirical findings demonstrating the presence of overconfidence bias and its contribution to observed volatility in the GSE during the Covid-19 pandemic period.…”

Section: Discussionsupporting

confidence: 92%

“…Second, this paper assesses how overconfidence bias contributes to the observed volatility on the Ghana stock market during the Covid-19 pandemic period. This is motivated by previous studies that document overconfidence bias on financial markets (Statman et al, 2006;Shrotryia and Kalra, 2021;Kunjal and Peerbhai, 2021) and the empirical evidence that overconfidence bias contribute to stock market volatility (Mushinada, 2020;Jlassi et al, 2014;Chuang and Lee, 2006). This study focuses on the market level due to the argument of Fama (1998) cited in Chuang and Lee (2006) that valid finance theory should be able to explain the market as a whole rather than a specific group or type of investors.…”

Section: Introductionmentioning

confidence: 97%

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Overconfidence bias and stock market volatility in Ghana: testing the rationality of investors in the Covid-19 era

Kuranchie-Pong

Forson

2021

AJEMS

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PurposeThe paper tests the overconfidence bias and volatility on the Ghana Stock Exchange (GSE) during the pre-Covid-19 pandemic and Covid-19 pandemic period.Design/methodology/approachThe study employs pairwise Granger causality to test the presence of overconfidence bias on the Ghana stock market as well as GARCH (1,1) and GJR-GARCH (1, 1) models to understand whether overconfidence bias contributed to volatility during pre-Covid-19 pandemic and Covid-19 pandemic period. The pre-Covid-19 pandemic period spans from January, 2019 to December, 2019, and Covid-19 pandemic period spans from January, 2020 to December, 2020.FindingsThe paper finds a unidirectional Granger causality running from weekly market returns to weekly trading volume during the Covid-19 pandemic period. These results indicate the presence of overconfidence bias on the Ghana stock market during the Covid-19 pandemic period. Finally, the conditional variance estimation results showed that excessive trading of overconfident market players significantly contributes to the weekly volatility observed during the Covid-19 pandemic period.Research limitations/implicationsThe empirical findings demonstrate that market participants on the GSE exhibit conditional irrationality in their investment decisions during the Covid-19 pandemic period. This implies investors overreact to private information and underreact to available public information and as a result become overconfident in their investment decisions.Practical implicationsFindings from this paper show that there is evidence of overconfidence bias among market players on the GSE. Therefore, investors, financial advisors and other market players should be educated on overconfidence bias and its negative effect on their investment decisions so as to minimize it, especially during the pandemic period.Originality/valueThis study is a maiden one that underscores investors’ overconfidence bias in the wake of a pandemic in the Ghanaian stock market. It is a precursor to the overconfidence bias discourse and encourages the testing of other behavioral biases aside what is understudied during the Covid-19 pandemic period in Ghana.

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Section: Discussionsupporting

confidence: 92%

Section: Introductionmentioning

confidence: 97%

Overconfidence bias and stock market volatility in Ghana: testing the rationality of investors in the Covid-19 era

Kuranchie-Pong

Forson

2021

AJEMS

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“…Academic literature states that as the value of portfolios of the investors declines during the financial crisis, they become fearful and enraged due to uncertainty of their future. They become irrational and reluctant to show tolerance and expectation for the market upturn in future (Mushinada, 2020 ). Also, investors turn out to be risk averters and consequentially decrease their allocation in equity due to a rise in perceived risk (Baker and Ricciardi, 2014 ).…”

Section: Analysis Of Resultsmentioning

confidence: 99%

Modeling of factors affecting investment behavior during the pandemic: a grey-DEMATEL approach

2022

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The study intends to examine the cause-and-effect relationship between Covid-19 and the factors affecting investment behavior in a South Asian economy. The investment behavior is considered as an MCDM problem. To address this problem, the study employs MCDM approach i.e., a blend of both DEMATEL and Grey theory due to its potential to deal with subjective judgments of investors. The results indicate that Covid-19 is the leading cause behind financial stress, psychophysiological health outcomes, investors' perception about the market, and investors' strategy. Among sub-factors, portfolio allocation is the most influenced sub-factor. Alteration in portfolio is a major challenge for emerging countries which have become attractive destinations for global investors. Overall, the significant contribution of the paper is to establish the interlinkages among the factors affecting investment behavior, given the uncertainty triggered by the pandemic. Although the literature provides evidence on this problem during normal situations, analysis of investment behavior during severe crisis is still lacking. The research will be immensely useful to different stakeholders such as government, policymakers, financial advisors, and investors in making their strategic or operational decisions.

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“…Existing work in traditional nancial markets has found that participants typically become risk-averse following market crashes [14]. Risky behaviour is most prevalent in the period preceding a market crash, often due to overcon dence [15]. Whilst recommendations to responsibly invest may be helpful to some investors, the amount of nancial advice provided on the subreddit could be a cause for concern, especially during periods in the market where engagement in risky or gambling-like trading is likely to be higher.…”

Section: Discussionmentioning

confidence: 99%

A thematic analysis of mental health, addiction and gambling discussion on Reddit during the recent cryptocurrency market downturn

Johnson

Stjepanović

Leung

et al. 2022

Preprint

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Purpose Considering the volatility of the cryptocurrency market, it is important to investigate the impact that market participation has on mental health. Therefore, we analyzed Reddit discussions regarding mental health, gambling, and addiction from members of the cryptocurrency discussion board, r/cryptocurrency, during a recent downturn in the cryptocurrency market. Methods We collected 1315 threads submitted to the subreddit r/cryptocurrency between January 3rd to February 4th. A thematic analysis was employed, which included threads that discussed psychological wellbeing, mental health or gambling. Results We thematically analyzed the content of 130 threads, which contained 7635 comments. Our analysis identified three main themes present in user discussion. Theme 1 (emotional state and mental health) captured users' discussion on their wellbeing, mental health and emotional responses to the market downturn. Theme 2 (strategies for coping) examined coping strategies recommended by users to combat distress to the market conditions or trading urges. Theme 3 (likeness to gambling) captured discussion on the relationship between cryptocurrency and gambling based on its fixating properties and risk profile. Conclusions Reddit is a valuable resource for examining the experiences and attitudes of the cryptocurrency community. Accounts of Reddit users' experiences provided insight into the mental distress market downturns can cause and strategies to combat problems due to trading. Our findings offer qualitative insights into the problems experienced by individuals who cryptocurrency trade and encourage further investigation into its relationship with mental health.

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How do investors behave in the context of a market crash? Evidence from India

Cited by 16 publications

References 79 publications

Overconfidence bias and stock market volatility in Ghana: testing the rationality of investors in the Covid-19 era

Overconfidence bias and stock market volatility in Ghana: testing the rationality of investors in the Covid-19 era

Modeling of factors affecting investment behavior during the pandemic: a grey-DEMATEL approach

A thematic analysis of mental health, addiction and gambling discussion on Reddit during the recent cryptocurrency market downturn

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