Overconfidence can influence investor behaviours in China

Overconfidence is a common psychological condition defined as the irrational belief that one's chances of success are higher than they really are. The damage overconfidence can do in world finance even more glaring. Small and medium-sized investors lack information collection, professional skills, trend-following behaviour large shareholders, firm management, institutional investors. In China, stock market dominated by small retail They often make decision based on limited knowledge have. Still, owing to hubris, many falsely assume making money simple or consistently outperform whole. frequently trade provide liquidity market, but their leads them set unrealistically high-profit targets, incorrectly attribute gains operating fail adequately account for losses result events outside control. Transaction costs eat into earnings. among has been shown increase risk volatility.