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Investigation of investors' overconfidence, familiarity and socialization

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  • Alireza Tourani-Rad
  • Stephen Kirkby

Abstract

This study, using a sample of New Zealand investors, investigates three behavioural finance theories: investor overconfidence, socialization and the familiarity effect. We find support for the investor overconfidence theory, using characteristics such as past success, optimism, confidence in one's abilities, investment experience and investment-related knowledge. Concerning the socialization theory, we observe that the investors actively sought information regarding the stock market, 75 per cent doing this on a weekly basis. Those investors that kept themselves informed daily outperformed other investors by 8 per cent. The familiarity effect was confirmed, showing investors to hold a far too high proportion of local stocks, although the majority of investors believed international equity markets would provide returns that were either better or equal to New Zealand stocks. Copyright 2005 Accounting and Finance Association of Australia and New Zealand..

Suggested Citation

  • Alireza Tourani-Rad & Stephen Kirkby, 2005. "Investigation of investors' overconfidence, familiarity and socialization," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 45(2), pages 283-300.
  • Handle: RePEc:bla:acctfi:v:45:y:2005:i:2:p:283-300
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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-629x.2004.00131.x
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    Cited by:

    1. Serenko, Alexander & Bontis, Nick, 2011. "What's familiar is excellent: The impact of exposure effect on perceived journal quality," Journal of Informetrics, Elsevier, vol. 5(1), pages 219-223.
    2. Shih-Wei Wu & Fengyi Lin & Wenchang Fang, 2012. "Earnings Management and Investor's Stock Return," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(S3), pages 129-140, September.
    3. Shih-Wei Wu & Fengyi Lin & Wenchang Fang, 2012. "Earnings Management and Investor's Stock Return," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(S3), pages 129-140, September.
    4. repec:bla:acctfi:v:57:y:2017:i:3:p:759-788 is not listed on IDEAS

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