Overconfidence and Investor Size

Abstract

"Recent research documents that institutional or large investors act as antagonists to other investors by showing opposite trading behaviour following the disclosure of new information. Using an extremely comprehensive official transactions data set from Finland, we set out to explore the interrelation between investor size and behaviour. More specifically, we test whether investor size is positively (negatively) correlated with investor reaction following positive (negative) news. We document robust evidence of that investor size affects investor behaviour under new information, as larger investors on average react more positively (negatively) to good (bad) news than smaller investors. We furthermore find that the performance of smaller, or more overconfident, investors is in general hurt by their behaviour." Copyright 2007 The Authors Journal compilation (c) Blackwell Publishing Ltd.

Overconfidence Among Professional Investors: Evidence from Mutual Fund Managers

“…Only a few studies examine overconfidence among professional investors. 8 Ekholm and Pasternack (2008) find that overconfidence decreases with investor size. O'Connell and Teo (2009) use data on the trading behavior of institutional currency traders and find that they increase risk-taking following gains.…”

Stock return autocorrelations and predictability in the Chinese stock market—Evidence from threshold quantile autoregressive models

“…Chen et al (2007) show that Chinese individual investors appear to make worse trading decisions and have more trading mistakes than institution investors. Odean (1998), Ekholm and Pasternack (2008) also confirm that institutional investors' trading decisions are less biased than the individuals in the behavioral aspects.…”

Overconfidence and stock returns: a behavioural perspective

“…More specifically, high income and high educational level have a statistically significant association with the level of overconfidence (Table 6). In spite of the fact that some studies have supported a negative relationship between experience and overconfidence (Ekholm and Pasternack, 2008;Gervais and Odean, 2001;Locke and Mann, 2001;Menkhoff et al, 2006, Christoffersen andSarkissian, 2002), analysis has shown that investment experience is positively correlated with overconfidence). In the same line, the majority of the studies have found similar findings (Frascara, 1999;Kirchler and Maciejovsky, 2002;Glaser et al, 2003;Griffin and Tversky, 1992;Obernarcher and Osler, 2008;Chen et al, 2004).…”

“…De Long et al (1990) and Wang (2001) 4 Investment experience positively affects overconfidence Gervais and Odean (2001), Locke and Mann (2001), Menkhoff et al (2006), Philip (2007), Ekholm and Pasternack (2008), Frascara (1999), Maciejovsky and Kirchler (2003), Glaser et al (2003), Griffin and Tversky (1992) and Obernarcher and Osler (2008) 5…”