Manifesting Overconfidence Bias and Disposition Effect in the Stock Market

Ganesh R, Naresh G and Thiyagarajan S
Additional contact information
Ganesh R: Assistant Professor, Department of Commerce and Management Studies, St. Mary’s College, India.
Naresh G: Associate Professor, Indian Institute of Management, Ranchi, Jharkhand, India.
Thiyagarajan S: Assistant Professor, Department of International Business, Pondicherry University, India.

International Journal of Business and Economics, 2020, vol. 19, issue 3, 257-284

Abstract: The study investigates the influence of overconfidence bias and disposition effect among the investors in the Indian stock market by examining these biases' presence on individual stocks in the index. The study also aims to determine which of the two biases, overconfidence or disposition, dominates the market. Security-wide Vector Autoregression (VAR) model, impulse response function, and nonlinear analysis are used to inspect the presence of overconfidence bias and disposition effect in the market. The study's findings have shown both biases are present in the Indian market, with the former being predominant. Knowledge of the two effects in the market can be exploited by the investors to maximize their returns from the market. Simultaneously, administrators can take preventive measures before market turbulence goes beyond control, damaging the investors.

Keywords: Overconfidence Bias; Loss Aversion Bias; Disposition Effect; Vector Autoregression; and Impulse Response Function (search for similar items in EconPapers)
JEL-codes: G02 G11 G12 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ijbe.fcu.edu.tw/assets/ijbe/past_issue/No.19-3/pdf/vol_19-3-3.pdf (application/pdf)
https://ijbe.fcu.edu.tw/assets/ijbe/past_issue/No.19-3/abstract/03.html (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ijb:journl:v:19:y:2020:i:3:p:257-284

Access Statistics for this article

International Journal of Business and Economics is currently edited by Hsiang-Tsai Chiang (Editor-in-Chief), Chiung-Ju Huang (Editor-in-Chief), Feng-Jyh Lin (Associate Editor), Tzu-Ching Weng (Associate Editor), Hsin-Yi Huang (Managing Editor) and Szu-Hsien Ho (Managing Editor)

More articles in International Journal of Business and Economics from School of Management Development, Feng Chia University, Taichung, Taiwan Contact information at EDIRC.
Bibliographic data for series maintained by Szu-Hsien Ho ().