Abstract
The purpose of this study is to investigate overconfidence as a mediator between
anchoring heuristic and trading volume of Pakistan Stock Exchange (PSX). To
measure the role of overconfidence as a mediator between anchoring heuristic and
trading volume, a sample of daily trading data from January 1st, 2004 to December
31st, 2017 of 301 listed companies at PSX is collected. Overconfidence was
measured through market volatility, the 52-week high price is used as a proxy to
measure anchoring heuristic, and investors’ investment decisions in PSX are
measured through trading volume. Results of structural equation modeling
revealed that market volatility plays a significant role between 52 weeks high price
and trading volume at PSX. Results suggest that overconfident investors use 52
weeks high price to trade stocks in the market and affect the investors’ investment
decisions. This paper adds to the literature of behavioral finance concerning the
role of overconfidence as a mediator between anchoring heuristic and investment
decisions. The evidence documented in this paper is first known to measure the
role of mediator between anchoring heuristic and investment decisions and it is
the novelty of current study.
Shagufta Parveen, Qazi Abdul Subhan, Samreen Fahim Baber, Zoya Wajid Satti. (2020) Role of overconfidence as mediator between anchoring heuristic and trade volume in Pakistan Stock Exchange, City University Research Journal, Volume 10, Issue 3.
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