Sensation Seeking, Overconfidence, and Trading Activity

  • Published: Mar 13, 2009
  • Pages: 549-578
  • DOI: 10.1111/j.1540-6261.2009.01443.x


This study analyzes the role that two psychological attributes—sensation seeking and overconfidence—play in the tendency of investors to trade stocks. Equity trading data from Finland are combined with data from investor tax filings, driving records, and mandatory psychological profiles. We use these data, obtained from a large population, to construct measures of overconfidence and sensation seeking tendencies. Controlling for a host of variables, including wealth, income, age, number of stocks owned, marital status, and occupation, we find that overconfident investors and those investors most prone to sensation seeking trade more frequently.

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