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A test of the different implications of the overconfidence and disposition hypotheses

  • Chou, Robin K.
  • Wang, Yun-Yi
Registered author(s):

    Under both the overconfidence and disposition biases, a positive relationship is predicted between prior returns and subsequent trading volume. However, theoretically the overconfidence and disposition effects have different implications on the relationships between the long- and short-position gains of traders and their subsequent buying and selling activities. We examine a unique dataset obtained from the Taiwan Futures Exchange which records all account-level trades and orders. Our data and methodology have the advantage of being able to empirically differentiate these two effects and we demonstrate that different types of traders exhibit different types and levels of behavioral biases.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0378426611000392
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    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 35 (2011)
    Issue (Month): 8 (August)
    Pages: 2037-2046

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    Handle: RePEc:eee:jbfina:v:35:y:2011:i:8:p:2037-2046
    Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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