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Overconfidence And Trading Volume: Evidence From An Emergent Market

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  • Zaiane Salma
  • Abaoub Ezzeddine

Abstract

t has been a challenge for financial economists to explain some stylized facts observed in securities markets, among them, high levels of trading volume. The most prominent explanation of excess volume is overconfidence. High market returns make investors overconfident and as a consequence, these investors trade more subsequently and make some transactions more aggressively. The aim of our paper is to study the impact of the phenomenon of overconfidence on the trading volume and its role in the formation of the excess volume on the Tunisian stock market. Based on the work of Statman, Thorley and Vorkink (2006) and by using VAR models and impulse response functions, we find a little evidence of the overconfidence hypothesis when we use volume (shares traded) as proxy of trading volume.

Suggested Citation

  • Zaiane Salma & Abaoub Ezzeddine, 2008. "Overconfidence And Trading Volume: Evidence From An Emergent Market," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(10), pages 1-41.
    • Handle: RePEc:alu:journl:v:1:y:2008:i:10:p:41
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    References listed on IDEAS

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    More about this item

    Keywords

    overconfidence; disposition effect; trading volume; emergent market;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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