The Effect Of Traders’ Cognitive Biases On Psychological Attributes And Confidence And Its Solutions: An Experimental Study
| dc.contributor.author | Chin, Phaik Nie | |
| dc.date.accessioned | 2017-01-12T08:21:11Z | |
| dc.date.available | 2017-01-12T08:21:11Z | |
| dc.date.issued | 2016-04 | |
| dc.description.abstract | Traders tend to make decisions based on their intuition, which leads to cognitive biases such as confirmation bias, self-serving bias and hindsight bias. These biases cause traders to display psychological attributes of overconfidence such as miscalibration, better than average effect and illusion of control over a decision, and thus, display overconfidence bias in their decision-making in the securities market. This thesis aims to examine the relationship between cognitive biases, psychological attributes of overconfidence and overconfidence bias, and solution mechanisms so as to minimise overconfidence bias among individual traders, with trading volume and price prediction error as the proxy. The study consists of three experimental series. Each series again is divided into a control treatment and two sub-main treatments. Each treatment consists of two main periods, where in the sub-main treatments subjects are treated by mechanism before the second period starts to reduce cognitive biases. The measurement of psychological attributes was collected through a questionnaire in the experiment, and the trading volume and price prediction error were deduced from a simple trading mechanism. Feedback and contradicting reason mechanism were tested as to their effectiveness in reducing overconfidence bias in individual traders. The results suggested that there is significant relationship between confirmation bias and miscalibration, and self-serving bias and better than average effect. Subjects with confirmation bias made larger price prediction errors compared with subjects without confirmation bias, and subjects with self-serving bias traded more than subjects without self-serving bias. Solution mechanisms were effective in reducing the psychological attribute, trading volume and price prediction error especially for subjects with confirmation bias. | en_US |
| dc.identifier.uri | http://hdl.handle.net/123456789/3431 | |
| dc.language.iso | en | en_US |
| dc.publisher | Universiti Sains Malaysia | en_US |
| dc.subject | Cognitive biases | en_US |
| dc.title | The Effect Of Traders’ Cognitive Biases On Psychological Attributes And Confidence And Its Solutions: An Experimental Study | en_US |
| dc.type | Thesis | en_US |
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