Research On Overconfidence In A-Share Market Based On Comparison Between Individual And Institutional Investors

This paper focuses on the overconfidence behavior from the perspective of the comparison between individual investors and institutional investors in A-share market. Based on Gevais and Odean (2001), and STV (2006), this research believes that the overconfidence make the investors contribute the high market return to excellent investment and private information so as to bring more turnover. This paper conducts the empirical study to contrast research from multiple perspectives on the basis of theoretical research. In empirical analysis, this paper which takes A-share stocks in July2004to June2013as samples utilize the proportion of institutional ownership, current market and turnover to build portfolios for reflecting the investment behavior of individual investors and institutional investors. This paper integrates with unrelated regression estimation model and multivariate granger causality test to verify the difference between individual investors and institutional investors. Furthermore, differences of overconfidence bias caused by the financial crisis bull&bear market conditions are tested in this model. In addition, we put forward the corresponding policy recommendations according to the research conclusion.This paper comes to the following conclusions:I. The A-share market have significant overconfidence behavior regardless of individual investors and institutional investors. II. In A-share market, overconfidence behaviors of individual investors and institutional investors have no significant difference. III. Before the financial crisis, individual investors are more overconfidence than institutional investors in large-sized portfolios, otherwise, the overconfidence bias in the two types of investors don’t have significant difference in small-sized portfolios. IV. The cumulative overconfidence levels of both individual and institutional investors did not differ significantly. However, in bull market condition, overconfidence bias of individual investors is higher than institutional investors, and the performance in bear market expresses opposite in several portfolios.