Overconfidence and Excessive Trading Behavior: An Experimental Study

  •  Irwan Trinugroho    
  •  Roy Sembel    


The main objective of the research is to examine the excessive trading hypothesis, investors who have higher
overconfidence shown by high miscalibration levels will tend to practice aggresive and excessive trading
strategy. It is an experimental research which combines both between and within subject design. The participants
are undergraduate students who have already taken financial management course but have not yet invest in real
capital market. The result of the research shows that high overconfidence investors have higher trading activity
than low overconfidence investor. The other result shows that among high overconfidence investors, there is no
trading activity differences between pre and post bad news, whereas among low overconfidence investors, the
existence of bad news cause trading activity to decrease in the post bad news period. Then, the investment
returns of high overconfidence investors is significantly lower than that of the low overconfidence investors.

This work is licensed under a Creative Commons Attribution 4.0 License.