Investor Overconfidence and Trading Volume

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ID: 301004
2006
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Abstract
The proposition that investors are overconfident about their valuation and trading skills can explain high observed trading volume. With biased self-attribution, the level of investor overconfidence and thus trading volume varies with past returns. We test the trading volume predictions of formal overconfidence models and find that share turnover is positively related to lagged returns for many months. The relationship holds for both market-wide and individual security turnover, which we interpret as evidence of investor overconfidence and the disposition effect, respectively. Security volume is more responsive to market return shocks than to security return shocks, and both relationships are more pronounced in small-cap stocks and in earlier periods where individual investors hold a greater proportion of shares. (JEL G11, G12) Copyright 2006, Oxford University Press.
Reference Key
openalex_W1579091683 Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Meir Statman, Steven Thorley, Keith Vorkink
Journal review of financial studies
Year 2006
DOI
10.1093/rfs/hhj032
URL
https://doi.org/10.1093/rfs/hhj032
Keywords Keywords not found

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