Investor Overconfidence and Trading Activity in the Asia Pacific REIT Markets

摘要

Overconfidence is one of the most robust behavioral anomalies in financial markets.By attributing investment gains to their ability, investors become overconfident and trade aggressivelyin subsequent periods. Evidence from stock markets shows that overconfidence leads to excessivetrading and, subsequently, inferior investment performance. However, studies on overconfidenceeffect are lacking in the real estate sector, which is particularly true for Asia Pacific real estateinvestment trust (REIT) markets. Thus, this study examines the overconfidence effect in six AsiaPacific REIT markets, namely, Australia, Hong Kong, Japan, Singapore, South Korea, and Taiwan.The study finds that the overconfidence effect is more conspicuous during market boom periods orin inefficient market conditions. In addition, simulation analysis demonstrates that overconfidencecould lead to rather large volumes of excessive trading activities in certain markets. Findings arerobust across the alternative measures of control variables. Moreover, the policy implications of theresearch are also discussed.