The effect of Overconfidence on Investors Behaviors: Evidences from Tehran Stock Exchange

Subject Areas : Financial Knowledge of Securities Analysis

S. Morteza Mousavi ¹ , M. Ebrahim Aghababaei ²

1 - کارشناس ارشد مهندسی مالی- دانشگاه خوارزمی، تهران، ایران
2 - استادیار دانشکده علوم مالی- دانشگاه خوارزمی، تهران، ایران

Received: 2016-05-16 Accepted : 2016-07-10 Published : 2017-06-22

Keywords: Overconfidence, Miscalibration, Illusion of Control, Optimism about Future, Better than Average Effect, Volatility Estimation,

Abstract :

In its most basic form, overconfidence can be summarized as unwarranted faith in one’s intuitive reasoning, judgments, and cognitive abilities .The objective of this study is to examine the effects of this important bias on decisions of investors. Here, besides measuring various aspects of overconfidence(mis calibration, illusion of control, optimism about future, better than average effect, volatility estimation), the relation between individual overconfidence aspects and three performance measures including trading volume of individual investors, number of orders and individual returnhas been tested. The result shows correlation coefficient of 0.747 with99 percent confidence level between overconfidence and number of orders. Also correlation coefficient of 0.695 with99 percent confidence level exists between overconfidence and order volume and finally more overconfidence does not result in more individual returns.

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