This dissertation finds that stocks that are more preferred by individual investors, which are likely to be traded more by individual investors and traded less by institutional investors, exhibit a more pronounced continuing overreaction in prices and reveal a stronger price overreaction to negative information. As continuing overreaction theoretically results from investor overconfidence and biased self-attribution, it suggests that individual investors are more subject to the psychological biases and overreact more to negative information than institutional investors. Additionally, I present empirical evidence suggesting that individual investor overconfidence improves stock liquidity and price efficiency, whereas institutional investor overconfidence impairs stock liquidity.