Title: Investor overconfidence bias in capital markets: sectoral evidence from the Ghana stock exchange

Authors: Godwin Musah; Daniel Domeher; Abubakar Musah; Joseph Quarshie

Addresses: Department of Banking and Finance, University of Professional Studies, Accra, Ghana ' Department of Accounting and Finance, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana ' Department of Banking and Finance, University of Professional Studies, Accra, Ghana ' Department of Banking and Finance, University of Professional Studies, Accra, Ghana

Abstract: Overconfidence as a behavioural bias has received great attention in stock market research. The focus of scholarly works on this theme, however, has been on the aggregate market. This present study investigates investor overconfidence bias in a sectoral decomposition of stocks traded in a developing capital market. The study employs the vector autoregressive (VAR) model and its associated impulse response functions as analytical tools. Investor overconfidence bias is documented in the distribution, manufacturing and agriculture sectors. The prevalence of this behavioural bias accounts for the high trading volume observed in the distribution, manufacturing and agriculture sectors. The study recommends among other things that efforts to minimise this bias should focus on sectors.

Keywords: sectoral; overconfidence bias; capital markets; Ghana; sector trading volume; sector return; Ghana Stock Exchange.

DOI: 10.1504/IJBAF.2024.143834

International Journal of Behavioural Accounting and Finance, 2024 Vol.7 No.3, pp.276 - 295

Received: 24 Jun 2024
Accepted: 16 Aug 2024
Published online: 09 Jan 2025 *

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