Overconfidence Mediates How Perception of past Portfolio Returns Affects Investment Behaviors

Q3 Business, Management and Accounting

Journal of Asia-Pacific Business Pub Date : 2019-04-03 DOI:10.1080/10599231.2019.1610688

Mohammad Tariqul Islam Khan, Siow-Hooi Tan, Lee-Lee Chong

{"title":"Overconfidence Mediates How Perception of past Portfolio Returns Affects Investment Behaviors","authors":"Mohammad Tariqul Islam Khan, Siow-Hooi Tan, Lee-Lee Chong","doi":"10.1080/10599231.2019.1610688","DOIUrl":null,"url":null,"abstract":"ABSTRACT Investors’ perception of past portfolio returns predicts their investment behavior, but does this relationship mediate by overconfidence? Taking into account different aspects of overconfidence, this paper examines whether overconfidence manifested as illusion of control, miscalibration and better-than-average mediates the association between perception of past portfolio returns and investment behavior. In a survey study with individual and institutional investors from Malaysia, the results indicate that perception of higher past portfolio returns increases investors’ trading, percentage of risky share investment and the number of financial asset holding, through the mediating channel of better-than-average effect. While individual investors are influenced by this overconfidence mechanism, institutional investors are not sensitive. This finding has theoretical implication for overconfidence model, house money effect and naïve reinforcement learning. Practically, the results imply that individual investors should be careful about underlying overconfidence biases as it can lead to inefficient decisions.","PeriodicalId":15043,"journal":{"name":"Journal of Asia-Pacific Business","volume":"20 1","pages":"140 - 161"},"PeriodicalIF":0.0000,"publicationDate":"2019-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1080/10599231.2019.1610688","citationCount":"4","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Asia-Pacific Business","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1080/10599231.2019.1610688","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"Business, Management and Accounting","Score":null,"Total":0}

引用次数: 4

Abstract

ABSTRACT Investors’ perception of past portfolio returns predicts their investment behavior, but does this relationship mediate by overconfidence? Taking into account different aspects of overconfidence, this paper examines whether overconfidence manifested as illusion of control, miscalibration and better-than-average mediates the association between perception of past portfolio returns and investment behavior. In a survey study with individual and institutional investors from Malaysia, the results indicate that perception of higher past portfolio returns increases investors’ trading, percentage of risky share investment and the number of financial asset holding, through the mediating channel of better-than-average effect. While individual investors are influenced by this overconfidence mechanism, institutional investors are not sensitive. This finding has theoretical implication for overconfidence model, house money effect and naïve reinforcement learning. Practically, the results imply that individual investors should be careful about underlying overconfidence biases as it can lead to inefficient decisions.

查看原文本刊更多论文

过度自信介导对过去投资组合回报的感知如何影响投资行为

摘要投资者对过去投资组合回报的感知可以预测他们的投资行为，但这种关系是否由过度自信介导？考虑到过度自信的不同方面，本文考察了表现为控制幻觉、校准错误和优于平均水平的过度自信是否介导了对过去投资组合回报的感知与投资行为之间的联系。在一项针对马来西亚个人和机构投资者的调查研究中，结果表明，对过去较高投资组合回报的感知通过优于平均水平的中介渠道增加了投资者的交易、风险股票投资百分比和金融资产持有数量。虽然个人投资者受到这种过度自信机制的影响，但机构投资者并不敏感。这一发现对过度自信模型、房价效应和天真的强化学习具有理论意义。实际上，研究结果表明，个人投资者应该小心潜在的过度自信偏见，因为这可能导致决策效率低下。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

求助全文

约1分钟内获得全文求助全文

来源期刊

Journal of Asia-Pacific Business Business, Management and Accounting-Business and International Management

CiteScore

2.50

自引率

0.00%

发文量

期刊介绍： Present circumstances underscore the need to improve the understanding of conducting business with and within the Asia-Pacific countries. The Journal of Asia-Pacific Business™ provides a blend of cutting-edge knowledge and practical applications on business management and marketing strategy. In the Journal of Asia-Pacific Business™, you will find articles and feature sections that provide a pragmatic view of the business environment in this dynamic region. This essential resource offers readers a good blend of descriptive, conceptual, and theoretical articles dealing with current topics.