Psychological basis for predicting stock returns based on behavioral finance - an example of overconfidence bias and herd behavior bias
Abstract
analysis and empirical research, the impact and mechanism of these two behavioral biases on stock market returns are explored. A relevant
theoretical model is constructed based on the development history of behavioral finance, so as to analyze the impact of overconfidence bias
and herd behavior bias on stock market returns. An empirical study was conducted by collecting relevant data and applying econometric
methods. The research results show that overconfidence bias and herd behavior bias have a significant impact on stock market returns. Among
them, overconfidence bias may lead investors to overvalue stocks, which in turn pushes up stock prices, while herd behavior bias may lead
investors to blindly follow the trend and increase market volatility. Policy makers should pay attention to the behavioral bias of investors and
reduce the degree of behavioral bias in the market by strengthening investor education and regulatory measures, thus improving the stability
and efficiency of the market.
Keywords
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DOI: http://dx.doi.org/10.18686/fm.v9i1.12032
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