Factors Influencing Investors Behavior to Become Overconfident While Stock Confrontation

Abstract

The rationale of this study is to explore the correlation between the characteristics of individual and financial institutional investors such as their Age, Experience, External information, knowledge, Self indulgence and Triumph analytically have persuade  individual and institutional investors’ investment decisions and prop up overconfidence among them while confronting stock. The rationale of this study is to categorize the factors that manipulate the Pakistan’s individual and institutional investors to become overconfident while confronting stocks. Twenty items under the five categories of variables were taken as independent that influences the individual and institutional investors’ overconfident. Data collection is made with the help of structured questionnaires. Sample size of 100 investors out of which 60 were individual investors (40 were male and 20 were female) and 40 were financial institutional investors registered at LSE. The statistical tools that were used for data scrutiny were mean, standard deviation, frequency distribution table of variables that have soaring and stumpy influence on decision making. Results of the calculated mean shown that all the variables are somewhat upsetting the behavior of investors to become overconfident and the presence of experience, knowledge, external information categories of variables are most influencing for institutional investors which do not prop up overconfidence while stock confrontation and self indulgence and triumph are least influencing for them. This research has concluded that institutional investors are more experienced, having high degree of knowledge and external information and low degree of self indulgence, are less overconfident while stock confrontation as compared to individual investors which are less experiences, having low degree of knowledge, external information and high self indulgence among themselves.

Keywords: Stock confrontation, overconfidence, behavior, self-indulgence, triumph.