Overconfidence Bias across Countries: Evidence from South Asian Stock Markets

Overconfidence in investors is generally associated with stock valuations and stock trading. High trading volumes represent biased self-attribution and self-overconfidence. Moreover, biased self-attribution leads to varying levels of overconfidence as compared to previous market returns. We test this proposition in the south Asian stock markets (Karachi stock exchange (Pakistan), Dhaka stock exchange (Bangladesh), and Bombay stock exchange (India)) in contrast to the U.S stock market (the Dow Jones Industrial average). The sample comprises corresponding index values from 2009-2018. Using Vector Auto Regression (VAR) and Granger causality tests for our analysis, this study confirms that previous returns significantly cause excessive stock trading in Pakistani, Bangladeshi, and U.S stock markets when returns dispersion and returns volatility are controlled. (C)2021 INT TRANS J ENG MANAG SCI TECH.