K.C. MISHRA and Mary METILDA J
This paper studies the impact of investment experience, gender, and the level of education on two specific biases, overconfidence and self-attribution bias. It also studies the relationship between the two biases. To achieve the said objectives, the following main hypotheses are tested. 1) H1: Overconfidence and self-attribution changes with investor experience 2) H2: Overconfidence and self-attribution changes with the level of education 3) H3: Overconfidence and self-attribution depends on gender 4) H4: There is a relationship between self-attribution bias and overconfidence bias.
Primary data was collected from 309 randomly chosen mutual fund investors who visited a company in Bangalore, which is the registrar and transfer agent for mutual fund asset management companies. Analysis of Variance (ANOVA) test was applied to test the significant difference between gender, level of education, and investor experience (independent variable) with the dependent variables overconfidence bias and self-attribution bias. To find the degree of association between the two variables and to find if self-attribution can be a significant predictor of overconfidence bias, correlation and regression analysis was used. The results of the study show that (1) The level of overconfidence increases with investor’s experience and with increase in the level of education 2) Self-attribution bias increases with the level of education. 3) Men are more overconfident than women. 4) There is an association between overconfidence bias and self-attribution bias, and self-attribution is a significant predictor of overconfidence bias. This study confirms that investor experience, level of education, and gender, do have an impact on investor bias. This study contributes to the existing literature on bias, especially the influence of demographic variables on overconfidence and self-attribution bias. From the investors’ perspective, an understanding of the psychology and emotions underlying investment decisions can help both financial advisors and individual investors in formulating their financial goals better.
