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The impact of overconfidence on trading volume during economic changes
2021 (English)Independent thesis Advanced level (degree of Master (One Year)), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

A central topic in behavioural finance is extensive trading. One of the most common behav- ioural explanations for this phenomenon is overconfidence. In finance, overconfident traders feel that their information is sufficient to justify a trade even though it is not. Investors who consider themselves to be above average in their level of expertise show higher trading volumes. During the COVID-19 pandemic, the trading volume in the financial markets increased significantly. Further, young and inexperienced traders entered financial markets and volatility increased. Overconfidence could provide explanations for some of these financial market particularities. The study of Glaser and Weber (2007), which investigates the correlation of overconfidence and trading volume, lays the foundation for this study. We extend their research with a survey testing the degree of overconfidence and trading volume during COVID-19. The central aim of the thesis is to investigate to what extent overconfidence influences the trading volume during the COVID-19 pandemic. The analysis is unable to show a significant positive effect of overconfidence on the trading volume during COVID-19. But our research supports the findings that younger and inexperienced traders entered the market during 2020, who are on average more overconfident than experienced traders. The results further show that retail investors with more than two years of trading experience have significantly increased their trading volume during COVID-19. The analysis also provides evidence that during the COVID- 19 pandemic, traders who assign themselves above average within their investment skills traded significantly more. 

Place, publisher, year, edition, pages
2021.
Keywords [en]
Overconfidence • COVID-19 • Trading volume • Individual investors • Investor behaviour • The correlation of psychological and economic variables
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:hj:diva-52596ISRN: JU-IHH-FÖA-2-20211258OAI: oai:DiVA.org:hj-52596DiVA, id: diva2:1558855
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Available from: 2021-06-15 Created: 2021-05-31 Last updated: 2025-10-13Bibliographically approved

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CiteExportLink to record
Permanent link

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Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
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  • Other locale
More languages
Output format
  • html
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  • asciidoc
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