Overconfidence Behavior and Managerial Decisions: Evidence from Pakistan

Abstract

The plan of this research is to probe the overconfidence behavior and managerial decisions in the Islamabad Stock Exchange (ISE) and different banks of Rawalpindi & Islamabad. To identify the impact of self-assuredly: future forecasting, analyzing market information, observing market fluctuations, and making decisions on the basis of financial wealth on the outcomes. The information on 61 feedback forms were gathered from the managers of the mutual funds and the branch as well as operation managers of various banks from Islamabad & Rawalpindi about overconfidence behavior & its influence on their decision making ability and judgments according to the future forecasting, available market information, financial wealth, and contrary evidences/market fluctuations were computed from side to side this data. With the help of the model of simple regression, we realize the ratios of all the variables (independent & dependent). Future forecasting, market information, financial wealth, and contrary evidences were found positively associated with overconfidence behavior of the investor. This study exposes the outcome of overconfidence behavior/psychology of human on the poor performance of the market: what kind of dynamics might shape the marketplace that is in attendance in each and every individual. Managers, by some means can predict the future movements of the market and make rational decisions if they carefully analyze the available market information and observe the current market fluctuations.

Keywords: Overconfidence, Managerial decisions, Pakistan