Overconfidence And Stock Market Turnover

Investor overconfidence is a widespread phenomenon in the stock market. Existing research shows that overconfident investors have higher trading volume than average investors. Because there are overconfident investors, the market as a whole showed a higher level of trading volume. This thesis uses experimental research to examine the level of individual investor trading volume and empirical research to the level of overconfidence on market. The results in this thesis show that overconfidence induces trading on personal level, and overconfident investors have a higher trading volume but a lower yield. Overconfidence also induces trading on market level and when the market as a whole exhibits overconfidence. the total volume of the market will significantly increase. On the basis of the previous model and empirical research, we use stock market experiments to examine the theory of overconfidence on trading volume, providing experimental evidence for the overconfidence research. Our research first used the residuals of investor confidence index and the actual stock market performance to define the level of market overconfidence. which provided a feasible method to directly test the overconfidence phenomenon of whole market.