Effect of confidence level and the type of information on the trading decisions in stock market

Ka Ching LAU

Research output: ThesisMaster's Theses

Abstract

Objectives: The present project aimed to explored whether the confidence level would interact with the type of available information in shaping people’s stock purchasing behavior. Previous studies have shown that overconfidence caused negative effect in financial trading activities, due to excess trading. However, little was known about how the confidence level may interact with the contextual factors such as the information type. It is crucial to see if information can affect the behavior. Methods: We conducted a study with 2 (confidence level: High vs low) x 2 (information type: Positive vs negative) design. A total of 188 participants were recruited. Participants were randomly assigned to either the high confidence or low confidence condition, and then randomly assigned to either viewing a positive or a negative information profile. Finally, they were asked to indicate how much they would invest in the stock market. Results: The results showed a significant interaction effect. In general, participants purchased more after viewing a positive information profile than after viewing a negative information profile. Importantly, this pattern was stronger among the participants in the high confidence condition. Conclusion: These results indicated that highly confident people were influenced by the information to a greater extent than less confident people. All rights reserved.
Original languageEnglish
Publication statusPublished - 2020

Keywords

  • Overconfidence
  • Market information
  • Behavioral economics
  • Theses and Dissertations
  • Thesis (M.Soc.Sc(Psy))--The Education University of Hong Kong, 2020.

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