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Are Happy Investors Likely to Be Overconfident?

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  • Chih-Lun Huang
  • Yeong-Jia Goo
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    Abstract

    This study investigates the relationship of investors' happy sentiment and overconfidence effect. Sunshine, temperature, former returns, and margin loan change rate are used as proxies for happy sentiment. Using data from Taiwan Stock Exchange and principal component analysis, the happy sentiment index is divided into two categories: "natural environment happiness" and "investment atmosphere happiness." The results suggest that when natural environment happiness is stronger, investors are less likely to have overconfidence. On the contrary, when investment atmosphere happiness is stronger, investors are more likely to have overconfidence.

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    Bibliographic Info

    Article provided by M.E. Sharpe, Inc. in its journal Emerging Markets Finance and Trade.

    Volume (Year): 44 (2008)
    Issue (Month): 4 (July)
    Pages: 33-39

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    Handle: RePEc:mes:emfitr:v:44:y:2008:i:4:p:33-39

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    Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=111024

    Related research

    Keywords: behavioral finance; investor sentiment; overconfidence;

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    Cited by:
    1. Yan-Ting Lin & Shang-Chi Gong & Sou-Shan Wu & Tsung-Pei Lee, 2012. "E/P Mean Reversion-Based Strategies for Investment Practice: Evidence from the Taiwan Market," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 48(1), pages 117-131, January.

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