Overconfidence and Investor Size

  1. Anders Ekholm,
  2. Daniel Pasternack

Article first published online: 29 OCT 2007

DOI: 10.1111/j.1468-036X.2007.00405.x

Issue

European Financial Management

European Financial Management

Volume 14, Issue 1, pages 82–98, January 2008

Additional Information

How to Cite

Ekholm, A. and Pasternack, D. (2008), Overconfidence and Investor Size. European Financial Management, 14: 82–98. doi: 10.1111/j.1468-036X.2007.00405.x

Author Information

  1. Department of Finance, Swedish School of Economics and Business Administration, P.O. Box 479, 00101 Helsinki, Finland. E-mail: anders.ekholm@hanken.fi; daniel.pasternack@hanken.fi

Publication History

  1. Issue published online: 29 OCT 2007
  2. Article first published online: 29 OCT 2007

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Keywords:

  • investor size;
  • trading behaviour;
  • overconfidence
  • G10;
  • G12;
  • G14

Abstract

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.

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