Investor’s Psychology in Stock Market: the influence of overconfidence in company valuation

So far, lot of researches have been done in Iran for evaluating investor’s psychology in the framework of linear and nonlinear models and using statistical models. Main purpose of these methods is simultaneous use of various independent variables for improvement of company valuation modeling. Hence, current research aims to consider investor’s psychology in stock market: the influence of overconfidence in company valuation, in companies accepted in Tehran Stock Exchange. This influence has been assessed using combined data of ۱۰۵ companies in years ۲۰۰۹–۲۰۲۱ and by utilizing dynamic and nonlinear data panel method with approach of instrumental variables Panel GMM, by Eviews ۱۰ and Sata ۱۶ software. This research considers importance of specific features of company like company size, debt, research and development activity, and structure of short-term debt in explaining agency expenditures. A dynamic partial adjustment model has been taken and analysis is done by estimation method GMM that controls influences of endogeneity and influences specific to company. In this research, evidences have been presented that investors’ overconfidence, asset return and financial leverage influence in a nonlinear and non-uniform manner. Particularly, this is the first experimental work inside country that considers a strong and compatible nonlinear relation between investor’s overconfidence, asset return and financial leverage on the value of company stock market with just one lag. Results of testing research hypotheses showed that investor’s overconfidence, asset return and financial leverage have significant influence on company stock market value.