Optimism and Overconfidence: Survey on Individual Investors of Taiwan Stock Market 2003 12 2004 2 4 6 5945.42 127.27 6004.53 200.65 6591.27 246.50 6297.71 408.59 10.7 10.8 15.4 6.9 8.8%~19.2% Breslow-Day Cochran-Mantel-Haenszel 1.84354.60333.70912.4132 Abstract Are stock investors overconfident? It is well recognized that male is more overconfident that female. This study argues that optimism even dominates more than gender. This study utilizes the databank of the Investors Sentiment Index Survey on Taiwanese Stock Investors from the Department of Finance, Shih Hsin University, to explore this issue. The databank is built up by calling over phone to the individual stock investors, enquiring about the subjective expectation toward near future. The survey is done every two months. This study covers 4 surveys from December 2003 to June 2003. During this period, Taiwanese stock market has gone through bull and bear stages, and thus offers an excellent platform to study the covariate between optimism and overconfidence, in addition to the gender factor. Overall speaking, the analysis results show that the overconfidence proportions are only respectively 10.7, 10.8, 15.4, and 6.9. The proportion gets lower in bear. The pessimistic investors are seldom overconfident, which is consistent with common understanding. And 1
the optimistic investors have greater ratio revealing overconfident8.8%~19.2%, the difference is significant. In addition, we use Breslow-Day and Cochran-Mantel-Haenszel tests to control the influence of gender, so that we may find out the relation between optimism and overconfidence. The results show that the ratio of overconfident investors in the optimism group versus the pessimistic group is respectively 1.8, 4.6, 3.7, 2.4. Which means, optimism is an important determinant of overconfidence. Key words: optimism, overconfidence 2
(De Bondt and Thaler, 1995) Shiller et al., 1996Lenney, 1977Beyer and Bowden, 1997 ) Barber and Odean2001 2.65 1.72 2004 2003 2004 6 1 3
Lichtenstein, Fischhoff and Philips(1982) 20 (De Bondt, 1985) (Kahneman and Riepe, 1998) De Bondt and Thaler(1995) Daniel, Hirshleifer and Subrahmanyam(1998) Odean(1998b) Hvide (2002) pragmatic beliefs Barber and Odean (Barber and Odean, 1999) 166 1991-1997 (Barber and Odean, 2000a) 35000 (Barber and Odean, 2000b) (Barber and Odean, 2001) Statman and Thorley1999 Disposition- Overconfidence effect 5 Claes Bengtsson2005 Stockholm University 5 4
Pei-Gi Shu Shean-Bii Chiu, Hsuan-Chi Chen, Yin-Hua Yeh2004 Barber and Odean1999Statman and Thorley 1999Shu, et al.2004 Shiller et al. 1996 ) 18 6 2003 12 8 19 2004 2 4 16 2004 3 26 4 8 2004 6 2 18 4,365 1,1271,0831,0731,082 95% 3% 6 5
Economic Index 4 UBS (1) (2) (3) (4) 2 1 0-1 -2 EI EI EI0 EI0 EI0 EI0 50% Svenson, 1981Cooper, Woo, and Dunkelberg, 1988Langer, 1988 (1) (2) (3) (4) (96) (97) / (98) (99) 0 7 T T 7 6
Breslow-Day Test Breslow-Day Test Odds Ratio Cochran-Mantel-Haenszel Test Cochran-Mantel-Haenszel Test 8 1 50.9% 49.1% 40 49 30.5% 39 26.3% 25.1 35.0% 39.9% 20 100 20 25.4% 20 100 59.2% 100 15.4% 10 45.6% 4 9 32.6% 3 21.8% 4 2 1 0-1 -2 EI EI EI0 EI0 EI0 EI0 8 7
50.8 68.6 51.0 36.6 1 1 2003/12 2004/02 2004/04 2004/06 554 573 1,127 % 49.2 50.8 100.0 340 743 1,083 % 31.4 68.6 100.0 526 547 1,073 % 49.0 51.0 100.0 686 396 1,082 % 63.4 36.6 100.0 2,106 2,259 4,365 % 48.2 51.8 100.0 10.7 10.8 15.4 6.9 2 16 36.4 40.3 40.0 24.8 2004 2 16.6% 10.8% 9 8
2 2003/12 2004/2 2004/4 2004/6 90 217 388 148 843 10 7.7% % 10.7 25.7 46 17.6 100.0 11-4.5% 93 253 370 142 858 12 2.1% % 10.8 29.5 43.1 16.6 100.0 1 8.2% 138 221 378 161 898 2 5.9% % 15.4 24.6 42.1 17.9 100.0 3-3.4% 62 162 397 284 905 4-6.2% % 6.9 17.9 43.9 31.4 100.0 5-2.3% 383 853 1,533 735 3,504 % 10.9 24.3 43.8 21.0 100.0 / / 2003 12 2 7.7-4.5 2 2004 2 2.1 8.2 2004 4 2004 6 1 3 15.4% 6.9% 3 2003/12 2004/02 2004/04 2004/06 10.70% 10.80% 15.40% 6.90% 7.7% -4.5% 2.1% 8.2% 5.9% -3.4% -6.2% -2.3% 1 9
2003/12 50.8% 2004/02 68.6% 2004/04 51.0% 2003/12 2004/02 2004/04 50.8% 68.6% 51.0% 17.8 P (0.000)*** 0.2-17.6 P (0.949) (0.000)*** -14.2-32.0-14.4 2004/06 36.6% P (0.000)*** (0.000)*** (0.000)*** 2004 2 68.6% 2003 12 50.8% 17.8% P =0.000*** 1 2003/12 49.2% 2004/02 31.4% 2004/04 49.0% 2003/12 2004/02 2004/04 49.2% 31.4% 49.0% -17.8 P (0.000)*** -0.2 17.6 P (0.949) (0.000)*** 14.2 32.0 14.4 2004/06 63.4% P (0.000)*** (0.000)*** (0.000)*** 2004 2 31.4% 2003 12 49.2% -17.8% P =0.000*** 1 2 ( ) 15.4% vs. 10.7 10.8 6.9% 6 10
2003/12 10.7% 2003/12 2004/02 2004/04 10.7% 10.8% 15.4% 2004/02 10.8% 2004/04 15.4% 0.1 P (0.914) 4.7 4.6 P (0.004)*** (0.005)*** -3.8-3.9-8.5 2004/06 6.9% P (0.005)*** (0.003)*** (0.000)*** 2004 2 10.8% 2003 12 10.7% 0.1% P =0.914 *** 1 1 EI EI EI EI0 0 / 7 7 10.5 11.3 19.2 8.8 7 11
7 92 12 30 369 155 554 EI<=0 5.4 66.7 28 100 60 384 129 573 EI>0 10.5 67 22.5 100 93 2 9 254 77 340 EI<=0 2.6 74.7 22.6 100 84 511 148 743 EI>0 11.3 68.7 19.9 100 93 4 33 417 76 526 EI<=0 6.3 79.2 14.4 100 105 343 99 547 EI>0 19.2 62.7 18.1 100 93 6 27 563 96 686 EI<=0 3.9 82.1 14 100 35 280 81 396 EI>0 8.8 70.7 20.5 100 99 1,603 404 2,106 EI<=0 4.7 76.1 19.2 100 284 1,518 457 2,259 7.92 (0.005)*** 21.59 (0.000)*** 44.77 (0.000)*** 13.74 (0.000)*** EI>0 12.6 67.1 20.2 100 / / **** 1 88.89 (0.000)*** 7 1 8 8 vs. 2003/12 2.00 1.04 1.03 2004/02 9.33 2.01 2.19 2004/04 3.18 0.82 1.04 2004/06 1.30 0.50 0.58 2.87 0.95 1.07 12
9 9 / (%) (%) (%) (P ) 2003/12 10.5 5.4 2004/02 11.3 2.6 2004/04 19.2 6.3 5.1 (0.002)*** 8.7 (0.000)*** 12.9 (0.000)*** 4.9 2004/06 8.8 3.9 (0.001)*** ( ) P *** 1% 10 2003/12 10.5% 2003/12 2004/02 2004/04 10.5% 11.3% 19.2% 2004/02 11.3% 0.8 P (0.631) 2004/04 19.2% 8.7 7.9 P (0.000)*** (0.000)*** 2004/06 8.8% -1.7-2.5-10.4 P (0.401) (0.195) (0.000)*** 2004 2 11.3% 2003 12 10.5% 0.8% P =0.631*** 1 13
11 2003/12 2004/02 2004/04 5.4% 2.6% 6.3% 2003/12 5.4% 2004/02 2.6% 2004/04 6.3% -2.8 P (0.049)** 0.9 3.7 P (0.547) (0.015)** -1.5 1.3-2.4 2004/06 3.9% P (0.216) (0.291) (0.063)* 2004 2 2.6% 2003 12 5.4% -2.8% P =0.049* 10 ** 1 2 12 Breslow-Day / / / / Breslow-Day Cochran-Mantel-Haenszel Breslow-Day / / 1.84354.60333.70912.4132 14
1.84354.60333.7091 2.4132 13 12 92 12 EI<=0 171 24 195 198 6 204 87.7 12.3 100.0 97.1 2.9 100.0 EI>0 189 50 239 195 10 205 79.1 20.9 100.0 95.1 4.9 100.0 93 2 EI<=0 125 6 131 129 3 132 95.4 4.6 100.0 97.7 2.3 100.0 EI>0 257 57 314 254 27 281 81.8 18.2 100.0 90.4 9.6 100.0 93 4 EI<=0 182 17 199 235 16 251 91.5 8.5 100.0 93.6 6.4 100.0 EI>0 180 69 249 163 36 199 72.3 27.7 100.0 81.9 18.1 100.0 93 6 EI<=0 250 20 270 313 7 320 92.6 7.4 100.0 97.8 2.2 100.0 EI>0 141 29 170 139 6 145 82.9 17.1 100.0 95.9 4.1 100.0 EI<=0 728 67 795 875 32 907 91.6 8.4 100.0 96.5 3.5 100.0 EI>0 767 205 972 751 79 830 78.9 21.1 100.0 90.5 9.5 100.0 / / / 15
13 Breslow-Day Test Cochran-Mantel-Haenszel Test P P 2003/12 0.0332 (0.8553) 1.8435 (0.0101)*** 2004/02 0.0002 (0.9886) 4.6033 (0.0001)*** 2004/04 0.3000 (0.5839) 3.7091 (0.0001)*** 2004/06 0.1985 (0.6559) 2.4132 (0.0009)*** *** 1 25%~40% 7%~15% 8.8%~19.2% 15.4 16
1. 2002 54 1-48 2. 2002 3. 2004 4. 2004 93 12 10 5. 2001 6. 2003 7. 2002 8. Cooper, Arnold C., Carolyn Y. Woo, and William C. Dunkelberg, 1988, Entrepreneurs Perceived Chances for Success, Journal of Business Venturing 3, 97-108. 9. Barber, Brad M. and T. Odean, 1999, The courage of misguided convictions, Association for Investment and Research, 41-55. 10. Barber, Brad M. and T. Odean, 2000a, Too many cooks spoil the profits : Investment club performance, Association for Investment and Research, 17-25. 11. Barber, Brad M. and T. Odean, 2000b, Trading is hazardous to your wealth: The common stock investment performance of individual investors, Journal of Finance 55, 773-806. 12. Barber, Brad M. and T. Odean, 2001, Boy will be boys: Gender, overconfidence and common stock investment, Quarterly Journal of Economics 116 (1), 261-292. 13. Beyer, Sylvia, and Edward M. Bowden, 1997, Gender Differences in Self- Perceptions: Convergent Evidence from Three Measures of Accuracy and Bias, Personality and Social Psychology Bulletin, 23, 157-172. 14. Claes Bengtsson, Mats Persson, Peter Willenhag, 2005, Gender and Overconfidence, Economics Letters 86, 199-203. 15. Daniel, Kent, D. Hirshleifer and A. Subrahmanyam, 1998, Investor psychology and security market under-and overreactions, Journal of Finance 53, 1839-1886. 16. De Bondt, W.M.F. and R.H.Thaler, 1985, Does the Stock Market Overrreact Journal of Finance, Vol.40,793-805. 17
17. De Bondt, W.M.F. and R.H.Thaler, 1995, Financial decision-making un markets and firms : A behavioral perspective, Robert A.Jarrow, V.Maksimovic,and W.Z.Ziemba, ed. : Finance, Handbooks in Operations Research and Management Science 9,385-410. 18. Hans K. Hvide, 2002, Pragmatic beliefs and overconfidence, Journal of Economic Behavior and Organization forthcoming 19. Kahneman, Daniel and Mark W. Riepe, 1998, Aspects of investor psychology, Journal of Portfolio Management, 52-65. 20. Kent, Daniel, David Hirshleifer and Avanidhar Subrahmanyam, 1998, A theory of over-confidence, self-attribution and security market over and under reactions, Journal of Finance 53 (5), 1839-1886. 21. Langer, E.J., 1988, The Illusion of Control, Journal of Personality and Social Psychology 32, 97-108. 22. Lenney, Ellen, 1977, Women s Self-Confidence in Achievement Settings, Psychology Bulletin, 84, 1-13. 23. Litchtenstein, S., B. Fischhoff and L. D. Phillips, 1982, Calibration of probability : The state of the art to 1980. In Dahneman, D. and A. Tversky(Eds. ), Judgment under uncertainty Heuristics and bias, 306-334, Cambridge University Press. 24. Meir, Statman and Steven Thorley, 1999, Investor overconfidence and trading valume, working paper. 25. Odean, Terrance, 1998a, Are investors reluctant to realize their losses? Journal of Finance 53, 1775-1798. 26. Odean, Terrance, 1998b, Volume, volatility, price and profit when all traders are above average, Journal of Finance 53, 1887-1934. 27. Prince, Melvin, 1993, Women, men, and money styles, Journal of Economic Psychology 14 (1), 175-182. 28. Shiller, Robert j., Fumiko Kon-Ya, and Yoshiro Tsutsui, 1996, Why Did the Nikkei Crash? Expanding the Scope of Expectations Data Collection, The Review of Economics and Statistics, 78, 156-164. 29. Shu, P. G.S. B. ChiuH. C. ChenY. H. Yeh, Does Trading Improve Individual Investor Performance? Review of Quantitative Finance and AccountingFLI, Vol. 22No. 32004199-218. 30. Shu, P. G.Y. H. YehS. B. ChiuH. C. Chen, Are Taiwanese Individual Investors Reluctant to Realize Their Losses? Pacific-Basin Finance Journal FLI 2005, forthcoming. 31. Simon, Gervais and Terrance Odean, 2001, Learning to be overconfidence, The Review of Financial Studies 14, 1-27. 18
32. Statman M. and S. Thorley, 1999, Investor overconfidence and trading volume. Working paper. 33. Svenson, Ola, 1981, Are We All Less Risky and More Skillful than Our Fellow Drivers? Acta Psychologica 47 (1981), 143-148. 19
557 49.4 544 50.2 555 51.7 566 52.3 2,222 50.960 117 10.5 137 12.7 99 9.3 96 9.0 449 10.4 377 33.8 375 34.8 379 35.7 380 35.6 1,511 35.0 167 16.2 142 14.1 174 17.7 130 13.4 613 15.410 517 46.4 486 45.2 496 46.6 476 44.3 1,975 45.6 92 12 93 2 92 4 92 6 570 50.6 539 49.8 518 48.3 516 47.7 2,143 49.1 1,127 100.0 1,083 100.0 1,073 100.0 1,082 100.0 4,365 100.0 29 97 8.7 111 10.3 107 10.0 89 8.3 404 9.3 3039 295 26.4 264 24.5 288 27.0 292 27.3 1,139 26.3 4049 330 29.5 314 29.2 352 33.1 322 30.1 1,318 30.5 5059 278 24.9 251 23.3 219 20.6 270 25.3 1,018 23.5 1,117 100.0 1,077 100.0 1,065 100.0 1,069 100.0 4,328 100.0 448 40.2 448 41.6 409 38.5 421 39.4 1,726 39.9 290 26.0 254 23.6 274 25.8 267 25.0 1,085 25.1 1,115 100.0 1,077 100.0 1,062 100.0 1,068 100.0 4,322 100.0 251 24.4 268 26.6 237 24.1 258 26.6 1,014 25.4 610 59.3 597 59.3 574 58.3 582 60.0 2,363 59.2 1,028 100.0 1,007 100.0 985 100.0 970 100.0 3,990 100.0 3 240 21.5 244 22.7 222 20.9 238 22.2 944 21.8 49 358 32.1 345 32.1 346 32.5 360 33.5 1,409 32.6 1,115 100.0 1,075 100.0 1,064 100.0 1,074 100.0 4,328 100.0 20
2 33 30 33 33 (Economy EI) index / / / / 4 2 1 0-1 -2 EI EI0 EI0 EI 0 EI 0 () / / (2)(3)(4)(96) /(97) /(98) (99) 0 () ( )~() 21