Investigating investors’ overconfidence behavior--Case studies from the processes of emerging companies becoming OTC

• Main Authors: Mneg-Yu Chiang, 江孟諭
• Other Authors: Chang-Chiun Cheng
• Format: Others
• Language: zh-TW
• Published: 2010
• Online Access: http://ndltd.ncl.edu.tw/handle/57568915179787062241

碩士 === 銘傳大學 === 財務金融學系碩士在職專班 === 98 === In the 1980s academics began applying psychology to investment practices and studied how investors’ psychology influenced financial decisions and the market, of which, overconfidence occurred the most often. Numerous researches had pointed out that when investors become more confident with their information and judgment then the trading turnover will also increase, and result in increased trade volume and price volatility. In Taiwan, when emerging companies apply for OTC they are required to undergo approvals from the OTC Committee, the GTSM Board, and the FSC Securities and Futures Bureau, before they can be on the OTC list. This process is full of uncertainties. However, whether the implication of a company nearing its OTC date with each approval application passed will induce increased investor confidence, and causing dramatic changes in price and trade volume is a topic worth investigating. The present research began from the behavioral deviation perspective of investor overconfidence according to behavioral finance. Changes in trade volume and price volatility of sample emerging companies with successful OTC transformations as they approached their OTC listing dates were investigated. Analyses were carried out on the correlation between increases in fluidity and changes in volatility. Samples were taken from the period of 1st March 2005 to 31st December 2009. Evidence suggested the following discoveries: 1.After emerging companies applied for OTC, investors’ confidence was boosted and caused enthusiastic trading activities. This resulted in obvious increases in fluidity and volatility. This phenomenon was most significant when Securities and Futures Bureau approved OTC application. 2.Regarding the influence of volatility on fluidity, daily price changes were relatively more influential on fluidity than next-day price changes. 3.Regarding the influence of fluidity on volatility, investor trading volumes were relatively more influential on price volatility than investor trading willingness.