Investor Overconfidence and Stock Price Crash Risk-Evidence from Chinese Stock Market

This article investigates the relationship between investor overconfidence behavior and stock price crash risk. Overconfidence is the common cognitive bias of human beings, certain degree of overconfidence in the financial market leads investors to overestimate their own capability and underestimate risk and volatility. The results suggest that investor overconfidence behavior contributes to the future stock price crash risk, and investors are more overconfident and stock price crash risk is higher in the bullish market than in the bearish market.