OVERCONFIDENCE AND TRADING VOLUME: EVIDENCE FROM AN EMERGENT MARKET

It has been a challenge for financial economists to explain some stylized factsobserved in securities markets, among them, high levels of trading volume. The mostprominent explanation of excess volume is overconfidence. High market returns makeinvestors overconfident and as a consequence, these investors trade more subsequently andmake some transactions more aggressively. The aim of our paper is to study the impact of thephenomenon of overconfidence on the trading volume and its role in the formation of theexcess volume on the Tunisian stock market. Based on the work of Statman, Thorley andVorkink (2006) and by using VAR models and impulse response functions, we find a littleevidence of the overconfidence hypothesis when we use volume (shares traded) as proxy oftrading volume.overconfidence, disposition effect, trading volume, emergent market

Exploring Disposition Effect and Overconfidence in Pakistani Investors in KSE Listed Sectors

Financial markets are analyzed by using different models in whichinvestors are “rational”. Many traditional theories of varying nature and applicationhave existed and been developed over the past several decades. Investors are thoughtof as rational individuals, who carefully take all economic decisions every time.But irregularities were noticed in the behavior of investors when economy of theworld was shaken by the Financial Crisis of 2008 that started off in the USA andresulted in global recession. The news of international financial crisis affectstheir investment strategies and help to estimate the shock absorbing abilities ofcapital market. This arise the need to study this phenomenon in capital market ofPakistan and check what heuristics are used by investors in decision making. Investorsuse heuristics in their financial decisions whenever they are faced with uncertainsituation. For this study we have collected data of ten years (2005-2014) of 229companies listed in all sectors of Karachi stock exchange. We used Logit regressionto find the relationship between disposition effect and overconfidence of investorsin Pakistani stock market. We have found that disposition effect is used by Pakistaniinvestors in their financial decision making and it helps them to generate returns.Overconfidence has negative but significant effect on investment returns for theinvestors. So theory of EMH and CAPM does not hold with all its assumptions in Pakistanicapital market.Keywords: Heuristics, Behavior, overconfidence, disposition effect,EMH, CAP

Index Developing and Modelling the Factors of Academic Procrastination among University Students

Procrastination is a very common and becomes a problem among students nowadays. Procrastination will give the negative effect on the learning style of students, resulting in their low achievements in performing tasks and examination of maybe it will cause failure in the examinations, resulting in anxiety and also depression next lowering in their morale. This study aims to develop an index of procrastination and to model the factors of procrastination among university students. The factors that have been considered in this study are self-esteem, lack of motivation, overconfidence and social problems. The sample of 203 students of year 1 and year 3 had been selected using the stratified sampling. In developing the index, the weightage is very important. The index developed has been categorized into 4 categories, Low Academic Procrastination (0.24 and below), Average Academic Procrastination (0.25 to 0.50), Above Average Academic Procrastination (0.51 to 0.75) and High Academic Procrastination (0.76 and above). Study also reveal that there is no significant mean different in Gender, Year of Study and Type of Program. Furthermore, from the Pearson’s Correlation Analysis result found that all the explanatory variables (lack motivation, self-esteem, confidence level and overconfidence) having the positive relation relationship with the dependent variable even it contribute the weak relationship. Among the four of independent variables only two variable were significant and 5 percent level of significance which are Lack of motivation and Overconfidence. Finding revealed that variable lack of motivation is the most influent factor towards academic procrastination

Dynamic Forecasting Behavior by Analysts: Theory and Evidence

We examine the dynamic forecasting behavior of security analysts in response to their prior performance relative to their peers within a continuous time/multi-period framework. Our model predicts a U-shaped relationship between the boldness of an analyst's forecast, that is, the deviation of her forecast from the consensus and her prior relative performance. In other words, analysts who significantly out perform or under perform their peers issue bolder forecasts than intermediate performers. We then test these predictions of our model on observed analyst forecast data. Consistent with our theoretical predictions, we document an approximately U-shaped relationship between analysts' prior relative performance and the deviation of their forecasts from the consensus. Our theory examines the impact of both explicit incentives in the form of compensation structures and implicit incentives in the form of career concerns, on the dynamic forecasting behavior of analysts. Consistent with existing empirical evidence, our results imply that analysts who face greater employment risk (that is, the risk of being fired for poor performance) have greater incentives to herd, that is, issue forecasts that deviate less from the consensus. Our multi-period model allows us to examine the dynamic forecasting behavior of analysts in contrast with the extant two-period models that are static in nature. Moreover, the model also differs significantly from existing theoretical models in that it does not rely on any specific assumptions regarding the existence of asymmetric information and/or differential analyst abilities.Security analysts, herding, career concerns

Attributional tendencies in cultural explanations of M&A performance

This paper focuses on managers' attributions of M&A performance. Our analysis indicates that there is a linear association between performance and attributions to cultural differences, which is moderated by prior experience. Furthermore, our results suggest that there is a curvilinear association between performance and attributions to managers' actions, but we found no support for the moderating effect of experience for this association. By substantiating these attributional tendencies, our results contribute to research on M&As and studies on attribution more generally. In particular, our study helps to put cultural differences in perspective and cautions researchers and practitioners alike to avoid simplistic explanations of M&A performance

The Stock Selection and Performance of Buy-Side Analysts

Prior research on equity analysts focuses almost exclusively on those employed by sell-side investment banks and brokerage houses. Yet investment firms undertake their own buy-side research, and their analysts face different stock selection and recommendation incentives than their sell-side peers. We examine the selection and performance of stocks recommended by analysts at a large investment firm relative to those of sell-side analysts from mid-1997 to 2004. We find that the buy-side firm's analysts issue less optimistic recommendations for stocks with larger market capitalizations and lower return volatility than their sell-side peers, consistent with their facing fewer conflicts of interest and having a preference for liquid stocks. Tests with no controls for these effects indicate that annualized buy-side Strong Buy/Buy recommendations underperform those for sell-side peers by 5.9% using market-adjusted returns and by 3.8% using four-factor model abnormal returns. However, these findings are driven by differences in the stocks recommended and their market capitalization. After controlling for these selection effects, we find no difference in the performance of the buy- and sell-side analysts' Strong Buy/Buy recommendations

Terrorist attacks, analyst sentiment, and earnings forecasts

We examine whether exogenous and extremely negative events, such as terrorist attacks and mass shootings, influence the sentiment and forecasts of sell-side equity analysts. We find that analysts who are local to these attacks issue forecasts that are relatively more pessimistic than the consensus forecast. This effect is stronger when the analyst is closer to the event and located in a low-crime region. Impacted analysts are also relatively more pessimistic around the one- and two-year anniversaries of the attacks. Collectively, these findings indicate that exposure to extreme negative events affects the behavior of information intermediaries and the information dissemination process in financial markets

Does Past Success Lead Analysts to Become Overconfident?

This paper provides evidence that analysts who have predicted earnings more accurately than the median analyst in the previous four quarters tend to be simultaneously less accurate and further from the consensus forecast in their subsequent earnings prediction. This phenomenon is economically and statistically meaningful. The results are robust to different estimation techniques and different control variables. Our findings are consistent with an attribution bias that leads analysts who have experienced a short-lived success to become overconfident in their ability to forecast future earnings.overconfidence, cognitive biases, analysts, earnings forecasts

Overconfidence, Effort, and Investment (Revised version of CentER DP 2013-035)

A positive relation between confidence and effort/investment provision has been theoretically justified and practically assumed in the literature, but has not been thoroughly investigated. We test and confirm this positive relation between direct measures of confidence and choice of effort or investment. More precisely, strong overconfidence results in excess investment of effort and money, underconfidence induces insufficient effort provision and underinvestment, and moderate overconfidence leads to accurate decisions. Our experimental results can be generalized as they are based on different subject pools (financial professionals and students), media (computer-, paper-, and web-based), and types of effort (real mental effort and monetary effort, i.e. investment)