An investigation of investors’ estimates of returns earned and the effect of anchoring on these estimations

Dowie, G; Willows, Gizelle D.

doi:10.1080/10291954.2015.1021559

Cited by 4 publications

(5 citation statements)

References 24 publications

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“…The results show that the largest proportion of respondents rate their level of financial knowledge as "average." These results are contrary to what the behavioural literature refers to as the "better-than-average" effect (Landier and Thesmar 2008) or the converse-pessimism bias (Dowie and Willows 2015). Furthermore, there is a statistically significant positive but weak correlation (0.45) between perceived and measured financial knowledge.…”

Section: Self-assessment Of Financial Knowledgecontrasting

confidence: 90%

Actual and Self-Assessed Financial Literacy among Employees of a South African University

Willows¹

2019

Numeracy

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This study examines the level of financial literacy and self-assessed financial literacy amongst members of a South African tertiary institution's retirement fund. Based on surveys of the fund's members, I employ descriptive statistics and multivariate regression analyses to examine differences in financial literacy within and across groups. The results show that, despite working for an employer implementing many best practices identified by financial literacy advocates, respondents from all demographic subgroups possess relatively low levels of financial knowledge. Men, White respondents, and those with a higher cost of employment or higher educational attainment were more likely to have a higher level of financial knowledge. In addition, while most respondents were accurate in their self-assessments of financial literacy, those less accurate self-assessments typically underestimated their abilities. The general accuracy of self-perception implies a self-awareness that can be appropriately exploited to attract lessnumerate individuals to training courses. Overall, the findings suggest we might more efficiently target training to subsets of individuals.

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Section: Self-assessment Of Financial Knowledgecontrasting

confidence: 90%

Actual and Self-Assessed Financial Literacy among Employees of a South African University

Willows¹

2019

Numeracy

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“…Nevertheless, the presence of investor overconfidence in the South African ETF market is consistent with the findings from alternative asset classes, such as, mutual funds (Bailey et al, 2011), REITs (Lin et al, 2010), and stocks (Statman et al, 2006). On the contrary, whilst Dowie and Willows (2016) document that South African unit trust investors are underconfident, this study finds that South African ETF investors are overconfident. This inconsistency may be because, relative to ETFs, unit trusts are more costly to trade on average (Steyn, 2019).…”

Section: Market-wide Investor Overconfidencesupporting

confidence: 86%

“…Bailey et al (2011) investigate the U.S. mutual fund industry from January 1991 to November 1996 and report that the trade decisions of mutual fund investors are influenced by the overconfidence bias. On the contrary, Dowie and Willows (2016) report that South African unit trust investors are underconfident rather than overconfident. Lin et al (2010) observe all Real Estate Investment Trusts (REITs) in the Center for Research in Security Prices (CRSP) database from 1990 to 2006 and discover that the turnover of the REIT market is positively influenced by investor overconfidence induced by the return of the REIT market.…”

Section: Empirical Evidence Of Investor Overconfidencementioning

confidence: 95%

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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“…The effect of anchoring on investors' estimates of returns earned in unit trust has been studied in investing environment in which subjects were invested and assessed that subjects would adjust their estimates subsequently presented with an anchor. Study resulted presence of an anchor appeared to have no effect on respondents 'assessments (Dowie & Willows, 2016) . To explore trading strategies that exploit investor's behavioral anchoring bias, a study was investigated where anchoring was studied both from technical signal and anomalies point of view.…”

Section: Review Of Literaturementioning

confidence: 85%

An Analysis of Behavioral Biases in Investment Decision-Making

Madaan¹,

Singh²

2019

IJFR

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Individual investor’s behavior is extensively influenced by various biases that highlighted in the growing discipline of behavior finance. Therefore, this study is also one of another effort to assess the impact of behavioral biases in investment decision-making in National Stock Exchange. A questionnaire is designed and through survey responses collected from 243 investors. The present research has applied inferential statistics and descriptive statistics. In the existing study, four behavioral biases have been reviewed namely, overconfidence, anchoring, disposition effect and herding behavior. The results show that overconfidence and herding bias have significant positive impact on investment decision. Overall results conclude that individual investors have limited knowledge and more prone towards making psychological errors. The findings of the study also indicate the existence of these four behavioral biases on individual investment decisions. This study will be helpful to financial intermediaries to advice their clients. Further, study can be elaborated to study other behavioral biases on investment decisions.

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An investigation of investors’ estimates of returns earned and the effect of anchoring on these estimations

Cited by 4 publications

References 24 publications

Actual and Self-Assessed Financial Literacy among Employees of a South African University

Actual and Self-Assessed Financial Literacy among Employees of a South African University

Investor overconfidence in the South African exchange traded fund market

An Analysis of Behavioral Biases in Investment Decision-Making

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