Is Popularity of Technical Analysis a Product of Low Financial Literacy and Overconfidence Among Stock Market Investors?

Individual investors' overall return in stock markets decreases with the increase in trading frequency due to factors such as commission expenses, insider trading, spreads, and institutional investors' high-frequency algorithms. In this study, the relationship between believing the technical analysis method and the financial literacy level, overconfidence, and high return expectations of investors have been analyzed with the use of survey data of 3,844 people. Although the efficiency of technical analysis and success in high-frequency trading depends on investor's analytical skills, it is found that technical analysis and trading are very popular among people who have low financial literacy and irrational high return expectations.