Overconfidence, trading volume and liquidity effect in Asia’s Giants: evidence from pre-, during- and post-global recession

Gupta, Suman; Goyal, Vinay; Kalakbandi, Vinay Kumar; Basu, Sankarshan

doi:10.1007/s40622-018-0185-9

Cited by 10 publications

(14 citation statements)

References 47 publications

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“…Some of them even did not measure overconfidence and instead used excessive investment or trading as a proxy for overconfidence (e.g. Chuang and Lee, 2006; Hwang et al , 2014; Khajavi; Dehghani, 2016; Liu et al , 2016; Zia et al , 2017; Gupta et al , 2018). Moreover, the overconfidence started to be linked and sometimes confused with other similar concepts, like optimism or illusion of control (e.g.…”

Section: Introductionmentioning

confidence: 99%

Overconfidence and financial decision-making: a meta-analysis

Grežo

2020

RBF

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PurposeThis meta-analysis reviews and summarizes the results of 34 studies to investigate the relationship between overconfidence and financial decision-making.Design/methodology/approachA correlation meta-analysis was conducted with three moderators of the relationship between overconfidence and financial decision-making examined: the type of overconfidence construct, the type of overconfidence measuring method and the type of financial decision-making.FindingsIt was found that the effect of overconfidence on financial decision-making was significant, but the magnitude of this effect was low. Additionally, indirect measures of overconfidence showed to have stronger effect than direct measures, and the overconfidence was mostly related to investment, followed by trading and innovativeness.Originality/valueThis was the first attempt to meta-analytically integrate results concerning the relationship between overconfidence and financial decision-making. Although overconfidence is described as a keystone for understanding financial decision-making, it was shown that it has rather limited effect on individuals' financial decisions. The findings suggest that indirect measures increase the overall effect and may cause the overvaluation of overconfidence in literature. The results call for more rigorous and consistent conceptualization of overconfidence in behavioral research.

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Section: Introductionmentioning

confidence: 99%

Overconfidence and financial decision-making: a meta-analysis

Grežo

2020

RBF

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“…Similar, Metwally and Darwish (2015) report that investor overconfidence is present in the Egyptian Exchange (EGX) from 2002 to 2012, however, investor overconfidence is more pronounced during bullish market conditions. Gupta et al (2018) find that both Indian and Chinese stock market investors are overconfident, however, Chinese investors are more overconfident than Indian investors. Gupta et al (2018) further report that both Indian and Chinese investors are overconfident before the 2008 global financial crisis, however, only Chinese investors remained overconfident after the crisis.…”

Section: Empirical Evidence Of Investor Overconfidencementioning

confidence: 84%

“…Gupta et al (2018) find that both Indian and Chinese stock market investors are overconfident, however, Chinese investors are more overconfident than Indian investors. Gupta et al (2018) further report that both Indian and Chinese investors are overconfident before the 2008 global financial crisis, however, only Chinese investors remained overconfident after the crisis.…”

Section: Empirical Evidence Of Investor Overconfidencementioning

confidence: 84%

“…Therefore, it is difficult to completely disentangle the overconfidence bias from the disposition effect (Statman et al, 2006). Despite this drawback in interpretation, an analysis of the trading activity of individual ETFs will confirm whether or not the observed overconfidence effect is a direct sum of the aggregate disposition effect (Gupta et al, 2018;Statman et al, 2006).…”

Section: Methodsmentioning

confidence: 99%

“…Other evaluations of the equity market have overwhelmingly found evidence of the overconfidence bias 1 affecting investment decisions (Baker et al, 2019;Jlassi et al, 2014;Meier & de Mello, 2020;Zaiane & Abaoub, 2009). The presence of investor overconfidence has been examined for markets of different asset classes, including stocks (Gupta et al, 2018), commodities (Yung & Liu, 2009), real estate (Lin et al, 2010) and index funds (Bailey et al, 2011). Kansal and Singh (2018) mention that the overconfidence bias is probably the most scrutinised behavioural bias in terms of its existence, determinants, and effects.…”

Section: Public Interest Statementmentioning

confidence: 99%

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Investor overconfidence in the South African exchange traded fund market

Kunjal

2021

Cogent Economics & Finance

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Exchange Traded Funds (ETFs) have proven to be extremely popular amongst both retail and institutional investors. The increasing interest in this asset class may incite overconfidence in its' investor base, which could lead to undesirable market effects such as security mispricing, excess trading volumes, and exacerbated market volatility. This study aims to examine the South African ETF market for presence of investor overconfidence. To achieve this objective, Vector Autoregression (VAR) models and their associated impulse response functions are employed to examine the relationship between the current trading activity and the historical market return. Consistent with the overconfidence hypothesis, a positive and significant relationship between current market turnover and lagged market returns is found for both ETFs with domestic benchmarks and ETFs with international benchmarks. Further analysis of panel VAR models and their associated impulse response functions suggest that the overconfidence bias also influences the trading activities of individual ETFs. These findings have important implications for various market participants.

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