Influence of Overconfidence on Investment Decision

Abstract

The Purpose of this research is to investigate the behavioral biases of investment advisors – The effect of overconfidence. The methods implied were descriptive distribution, reliability test, factor analysis and regression analysis.Peoples tend to perceive their initial performance better than it actually is, after learning the outcome. The test of this study shows the peoples tend to overestimate their initial capacity to choose the better performing asset from two alternatives or estimate the return of asset, after learning the realization.The results of overconfidence imply that people are overconfident. The evidence setting to narrow limits, effect is strong. Regression results show that significant F(P=.000)vale shows that the overall models are the good fit and all the variable included in these models are significantly explaining the variation.

Keywords: Behavioral Biases, Overconfidence, Investment Decision, Regression Analysis, Reliability Test, Descriptive Analysis.