Empirical Research On Investors’ Overconfidence And Excessive Trading

As the financial market develops,some abnormal phenomena are found to appear in the financial market that cannot be explained by traditional financial theories,such as the puzzle of volatility and trading volume,etc.For the real capital market,the efficient market hypothesis can no longer play its role.As the in-depth study on investors’ behavior is conducted,the emergence of behavioral finance is able to make a better explanation on the problem of high trading volume in the stock market based on investors’ psychology.A large number of scholars have confirmed that investors in the market have many irrational behaviors through empirical research,while the overconfidence of investor is one of the significant representatives of bounded rationality.From the perspective of the comparison between the science&technology innovation board and the main board,the excessive trading volume problem it brings to the stock market is analyzed from the irrational psychology of investors through the study of overconfidence phenomenon,in which a certain negative impact on the stock market will be brought.Through the research of this thesis,the explored content of investors’ overconfidence in the stock market can be enriched and a certain reference significance an be provided for investors’ investment decision-making on the one hand.As China’s capital market gradually develops,in addition to promoting the diversification development of China’s capital market,the establishment of the science and technology innovation board market under the registration system as a significant test field for China’s capital market reform also provides a certain data support for the establishment of institutional rules in the comprehensive launch of the reform of the stock issuance registration system announced by the China Securities Regulatory Commission on February 1,2023 from the perspective of investors’ irrational trading behavior on the other hand.Based on this,the great significance is embodied in the reform of the comprehensive registration system of the stock market and the economic transformation of our country.A kind of irrational psychological deviation is embodied as the feature of overconfidence.Investors think their own investment ability and accuracy of information promote the high returns,so the frequent investment transactions are caused.The excessive trading behavior reflects its externalization,which increases the market trading volume.In this thesis,the overconfidence of investors leading to excessive trading behavior is analyzed by taking the relationship between the return rate and the turnover rate of the stock market data as the focus,then the problem of excessive trading volume in the stock market is explained.Firstly,the research literature on overconfidence is combed and analyzed,the definition and measurement of overconfidence of investors,and relevant studies on excessive trading caused by overconfidence are given.Secondly,Odean’s theoretical research and Statman’s empirical test method are taken as the basis,the market data of China’s main board and science&technology innovation board are used,a vector autoregression model is constructed,the two important applications of the model such as Granger causality and impulse response analysis are combined to study China’s main board market and its different stages of development,as well as compare and analyze the degree and difference of excessive trading caused by overconfidence between the science&technology innovation board and the main board.Finally,in accordance with the empirical results,the policy recommendations suitable for the reform of China’s capital market registration system are proposed.From the research results of this thesis,it can indicate:Firstly,the overconfidence in China’s main board market is found to exist,and the excessive trading is caused by investors who carry out more frequent trading behavior after obtaining high returns.Secondly,the impact of the degree of excessive trading caused by the overconfidence of investors on the stock market will gradually weaken with the development of the stock market and the enhancement of investors’experience.Thirdly,the significantly higher degree of overconfidence and excessive trading of investors in the science and technology innovation board under the registration system is shown than that in the main board market.