Testing overconfidence bias in Pakistani stock market

Zia, Lubna; Sindhu, Muzammal Ilyas; Xia, Enjun

doi:10.1080/23322039.2017.1289656

Cited by 17 publications

(11 citation statements)

References 15 publications

(14 reference statements)

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“…According to the results quantile regression, the BTA variable is not significant at all which can be justified for our measure for the BTA variable that may not be appropriate or the form of overconfidence or better than average factor is really not the determinant impacting the risk-taking ability of investors. This result is in line with conclusion by Zia et al (2017) that the relation between loss realization and overconfidence bias due to excessive trading in financial market.…”

Section: Results Of Three Levels Of Risk-takingsupporting

confidence: 93%

Determinants of the possibilities by investors’ risk-taking: Empirical evidence from Vietnam

Bui

Huynh

et al. 2021

Cogent Economics & Finance

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This paper focuses on determining the factors influencing investors' risktaking through empirical evidence from Vietnam. This study investigates risk perception, expected return and herding behavior, and other determinants such as historical volatility and subjective financial risk attitude; according to previous studies, these are the main components affecting risk-taking behavior among investors. Overconfidence (better than average, miscalibration, and excessive optimism) is also taken into consideration. We employ pooled-OLS and quantile regression to overcome the shortage of research models in this field. In addition, we demonstrate how risk-taking behavior can be affected by those factors with the application of measures across four different investment channels. This study suggests implications for investors who wish to control risk.

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Section: Results Of Three Levels Of Risk-takingsupporting

confidence: 93%

Determinants of the possibilities by investors’ risk-taking: Empirical evidence from Vietnam

Bui

Huynh

et al. 2021

Cogent Economics & Finance

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“…Even financial literate investors also do not thinking about their portfolio diversification, our results strongly support the findings of Chu et al (2016) who scrutinized that financial literate investor don't tend to invest in portfolio diversification, however overconfidence significantly diversify their portfolio. In addition, our study supports the findings of Zia, Ilyas Sindhu, and Haider Hashmi (2017) that overconfidence bias has significant influence on investor trading in Pakistan stock market. However, as the size of their portfolio increases, they tend to diversify their portfolio.…”

Section: Discussionsupporting

confidence: 80%

Financial Literacy, Behavioral Biases and Investor's Portfolio Diversification: Empirical Study of an Emerging Stock Market

Anwar¹,

Khan²,

Rehman³

2017

j.financ.econ.res

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The purpose of this study is to check the impact of financial literacy and behavioral biases on investor's portfolio diversification. Data were collected through questionnaire using sample size of 181 investors trading in Pakistan Stock Market. The results indicate that financial literacy has insignificant and positive influence on investor's portfolio diversification, behavioral biases such as familiarity and availability biases have insignificant and negative while overconfidence bias has significant negative impact on investor's portfolio diversification. Portfolio size also has significant positive impact on portfolio diversification. The findings suggest the implementation of financial literacy programs to facilitate the investors, trading in different stocks. The implications for practice were discussed in detail.

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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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Testing overconfidence bias in Pakistani stock market

Cited by 17 publications

References 15 publications

Determinants of the possibilities by investors’ risk-taking: Empirical evidence from Vietnam

Determinants of the possibilities by investors’ risk-taking: Empirical evidence from Vietnam

Financial Literacy, Behavioral Biases and Investor's Portfolio Diversification: Empirical Study of an Emerging Stock Market

Overconfidence and financial decision-making: a meta-analysis

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