Abstract
This study extensively investigated the investor delusion in the Indian securities market over ten years (2013-2023), focusing on the grey swan period of 2020-23 using Nifty50 index data. The study fully addresses overconfidence bias at many levels. It initially checks for market-level overconfidence bias and then confirms it across NIFTY50 Index sectors. The study analyses industry overconfidence levels to reveal behavioural bias variances across Indian economic sectors. The study sheds light on overconfidence bias in three phases: pre-COVID (2013-19), Grey swan phase of COVID-19 (2020-23), and 2020 alone when India suffered unprecedented pandemic instability. By studying each era separately, the research illuminates the complicated dynamics of overconfidence bias during different market conditions and pandemic upheavals. Over the period, industries such as services, metals and minerals, and FMCG exhibited overconfident behaviour. Examining the impact of the grey swan phase of COVID-19 revealed an overconfidence bias in the Indian stock market, while the challenging period of 2020 demonstrated a loss aversion bias. We also detected a tendency in trading behaviour to overreact to private information signals, regarded as a component of overconfidence bias. This research shows how psychological prejudices impair market effectiveness and have implications for investors, regulators, and lawmakers. Investors can make better judgments and avoid behavioral biases by understanding overconfidence bias and its effects. Lawmakers and regulators can utilize these findings to create investor protection and market efficiency measures.
Keywords: Covid-19, Grey Swan, Overconfidence Bias, Private and Public Information, Sectoral Overconfidence Bias, Stock Price Over and Under Reaction.