The impact of overconfidence and gender on trading activity: how well do investors assess probability?

Abstract

People unconsciously exhibit overconfident behaviour in the capital market. Previous empirical research demonstrates that there is no conclusive result whether male or female investors tend to be more overconfident. The purpose of this research is to investigate whether male investors tend to be more overconfident than female ones in an emerging capital market such as in Indonesian capital market. According to this experimental research design, all participants are classified into two groups based on their score of overconfidence, namely less informed investors, and more informed investors. This research employs three different types of treatments, but only two treatments will be analysed consisting of the state of no available market information, and the provision of good news. The result demonstrates that male and female investors perform the same level of overconfidence when there is no available market information. Male and female investors are more likely to perform higher mean of prediction errors when they are classified as less informed investors. Referring to both the more and the less informed investors, female investors tend to be more overconfident than male investors when the market provides a signal of good news.