Title: Appraisal of investors' confidence on portfolio investments

Authors: R. Ganesh; S. Thiyagarajan; G. Naresh

Addresses: PG and Research Department of Commerce and Management Studies, St. Mary's College, Sulthan Bathery, Wayanad-673592, India ' Department of International Business, School of Management, Pondicherry University, Puducherry-605014, India ' Indian Institute of Management, Ranchi, Jharkhand, India

Abstract: The aim of all investors is to assess the securities price correctly and to take best investment decisions. However, the influence of bias in their decisions ends up in irrational decisions. Two important biases that influence their rational decision is overconfidence bias and disposition effect. The present study examines the presence of both these biases in Indian stock market during the period 1st April 2005 to 31st March 2019 and to inspect how long these biases persist in the market portfolios with the help of Vector Autoregression (VAR) and impulse response function. Nifty 500 index is considered as a proxy to represent Indian stock market and constituent stocks of Nifty 50 index is considered as a proxy to represent the market portfolio in the present study. The study finds evidence of overconfidence bias in the investment in overall market and in selected portfolio, but could not find disposition effect in the market portfolio investments.

Keywords: market portfolio; overconfidence bias; loss aversion bias; disposition effect; sunk cost.

DOI: 10.1504/IJFSM.2021.120362

International Journal of Financial Services Management, 2021 Vol.11 No.2, pp.116 - 133

Received: 12 Sep 2020
Accepted: 21 Sep 2021
Published online: 17 Jan 2022 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article