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Overconfidence and Investor Size
Author(s) -
Ekholm Anders,
Pasternack Daniel
Publication year - 2008
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/j.1468-036x.2007.00405.x
Subject(s) - overconfidence effect , investor profile , investor behavior , business , monetary economics , accredited investor , set (abstract data type) , institutional investor , investor protection , investor relations , test (biology) , financial economics , behavioral economics , economics , accounting , finance , psychology , corporate governance , marketing , social psychology , computer science , biology , programming language , strategic management , paleontology
Recent research documents that institutional or large investors act as antagonists to other investors by showing opposite trading behaviour following the disclosure of new information. Using an extremely comprehensive official transactions data set from Finland, we set out to explore the interrelation between investor size and behaviour. More specifically, we test whether investor size is positively (negatively) correlated with investor reaction following positive (negative) news. We document robust evidence of that investor size affects investor behaviour under new information, as larger investors on average react more positively (negatively) to good (bad) news than smaller investors. We furthermore find that the performance of smaller, or more overconfident, investors is in general hurt by their behaviour.