The Impact of Over Confidence, Loss Aversion and Regret Aversion on Investors Trading Frequency : Empirical Evidence of Pakistan Stock Exchange

Excessive trading frequency of individual investors is never completely explained from concepts covered under traditional finance. Therefore, objective of this paper is to investigate the impact of three behavioral biases i.e., overconfidence, loss aversion and regret aversion on the trading frequency of individual investors in Pakistan Stock Exchange (PSX). This objective has been achieved by selection of a sample of individual investors through convenience sampling technique. The sample is drawn from the total population of 220,000 individual investors registered at PSX. Research is conducted in positivist paradigm in which 384 questionnaires are used for collecting primary data from the respondents. Multiple linear regression technique is used to assess the degree and direction of the relationship among selected variables of study. The results revealed that overconfidence of individual investor has positive and significant impact on trading frequency of investors. Whereas, loss aversion and regret aversion both have negative and significant impact on trading frequency of individual investors. This study provides a guideline to policy makers such as Securities and Exchange Commission of Pakistan (SECP) who are trying to sort out plausible solutions pertaining to overconfidence, loss aversion and regret aversion behavioral biases impact on individual investors in PSX. Study is also taken as an effective guideline for individual investors who are encountered by behavioral biases specifically overconfidence, loss aversion and regret aversion