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OVERCONFIDENCE BIAS EMPIRICAL EXAMINATION OF TRADING TURNOVER AND MARKET RETURNS

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50 Pages : 384-390

http://dx.doi.org/10.31703/gssr.2019(IV-II).50      10.31703/gssr.2019(IV-II).50      Published : Jun 2019

Overconfidence Bias: Empirical Examination of Trading Turnover and Market Returns

Abstract

    Theory of overconfidence states that investors are highly overconfident when valuing the stocks. Self-attribution has been found by the researchers as the root cause for overconfidence bias in investors. Investors attribute the high stock prices and returns with their own art of picking up the stocks, and thus they trade more frequently. In order to test overconfidence and self-attribution Vector Autoregressive (VAR) model has been employed to find out the long-term relationship between endogenous variables: market return and market turnover and exogenous variables: volatility and dispersion. Results revealed that there exists a strong positive relationship between market returns and trading turnover. Also, the crosssectional standard deviation in market prices i-e volatility and the cross-sectional variation in stock returns i-e dispersion has a very strong impact on trading pattern and returns. Since investment decisions made by Pakistani investor largely depend upon psychological factors, giving less weightage to all the fundamentals, the trading pattern exhibited may collectively tend the market behave in an irrational manner.

    (1) Syeda Faiza Urooj
    Assistant Professor, Department of Commerce, Federal Urdu University of Arts Science & Technology, Islamabad, Pakistan.
    (2) Nosheen Zafar
    Accounts Officer, Accountant General Pakistan Revenue, Islamabad, Pakistan.
    (3) Muzammal Ilyas Sindhu
    Lecturer, Department of commerce, Federal Urdu University of Science and Technology, Islamabad, Pakistan
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Cite this article

APA

    APA : Urooj, S. F., Zafar, N., & Sindhu, M. I. (2019). Overconfidence Bias: Empirical Examination of Trading Turnover and Market Returns. Global Social Sciences Review, IV(II), 384-390. https://doi.org/10.31703/gssr.2019(IV-II).50

CHICAGO

    CHICAGO : Urooj, Syeda Faiza, Nosheen Zafar, and Muzammal Ilyas Sindhu. 2019. "Overconfidence Bias: Empirical Examination of Trading Turnover and Market Returns." Global Social Sciences Review, IV (II): 384-390 doi: 10.31703/gssr.2019(IV-II).50

HARVARD

    HARVARD : UROOJ, S. F., ZAFAR, N. & SINDHU, M. I. 2019. Overconfidence Bias: Empirical Examination of Trading Turnover and Market Returns. Global Social Sciences Review, IV, 384-390.

MHRA

    MHRA : Urooj, Syeda Faiza, Nosheen Zafar, and Muzammal Ilyas Sindhu. 2019. "Overconfidence Bias: Empirical Examination of Trading Turnover and Market Returns." Global Social Sciences Review, IV: 384-390

MLA

    MLA : Urooj, Syeda Faiza, Nosheen Zafar, and Muzammal Ilyas Sindhu. "Overconfidence Bias: Empirical Examination of Trading Turnover and Market Returns." Global Social Sciences Review, IV.II (2019): 384-390 Print.

OXFORD

    OXFORD : Urooj, Syeda Faiza, Zafar, Nosheen, and Sindhu, Muzammal Ilyas (2019), "Overconfidence Bias: Empirical Examination of Trading Turnover and Market Returns", Global Social Sciences Review, IV (II), 384-390

TURABIAN

    TURABIAN : Urooj, Syeda Faiza, Nosheen Zafar, and Muzammal Ilyas Sindhu. "Overconfidence Bias: Empirical Examination of Trading Turnover and Market Returns." Global Social Sciences Review IV, no. II (2019): 384-390. https://doi.org/10.31703/gssr.2019(IV-II).50