Advances in Economics, Management and Political Sciences
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Proceedings of the 2nd International Conference on Business and Policy Studies
Series Vol. 8 , 13 September 2023
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The Impact of Investor’s Overconfidence Bias on Investment Strategy Based on Behavioral Finance
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Abstract
As international financial markets continue to diversify and become more complex, the application of behavioral finance in financial markets is becoming more and more widespread. At the same time, as people's living standards continue to rise, the securities market is a relatively optimal investment choice. To protect the wealth of investors and improve the standard of living of the nation, it is essential to ensure the stability of the investment market, which forces us to study the impact of imperfectly rational behavior on the stock market. Overconfidence bias is one of the most common types of imperfectly rational psychology. Therefore, it is of great significance to study the impact of overconfidence on investment portfolios. This paper aims to examine the effect of overconfidence bias on an investor's investment strategy through a literature review and empirical methods. The paper concludes that overconfidence bias shows a different relationship with return yield in the initial, completion, and diminishing periods. Secondly, overconfidence bias for investors exists. The characteristics of better-than-average-effect (BTAE) and the illusion of control have different effects on trading volume, return volatility, and market efficiency, and the role of contrarian investment strategy (CIS) in overcoming this bias is discussed.
Keywords
investment decision, behavioral finance, overconfidence biases
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Data Availability
The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.
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- Volume Title
- Proceedings of the 2nd International Conference on Business and Policy Studies
- ISBN (Print)
- 978-1-915371-43-0
- ISBN (Online)
- 978-1-915371-44-7
- Published Date
- 13 September 2023
- Series
- Advances in Economics, Management and Political Sciences
- ISSN (Print)
- 2754-1169
- ISSN (Online)
- 2754-1177
- DOI
- 10.54254/2754-1169/8/20230292
- Copyright
- 13 September 2023
- Open Access
- This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited