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An Empirical Analysis of the Excessive Volatility-Overconfidence Relationship: Evidence from the Tunisian Stock Market

Author

Listed:
  • Bayoudh Feker
  • Houfi Mohamed Ali
  • Tissaoui Kais
  • Zamouri Sana

Abstract

The purpose of this paper is to provide that the explanation of excessive volatility can be only done through an attentive description of the psychological aspects of the investors. Our interest is carried in particular to the overconfidence bias. Our objective in this study is to identify whether the excessive volatility of observed stocks on the Tunisian Stock Market (TSE) results from the excessive trading of overconfident investors. The analysis of the obtained results, over the period January 1999 – October 2007, indicates quite clearly the importance of considering this bias in analysis of the specificities of Tunisian Stock Market (TSE). It appears that overconfidence admits a more pronounced effect on the volatility for daily time intervals compared to weekly and monthly intervals.The asymmetric nature of the dynamics of return volatility in response to positive and negative shocks is also checked.

Suggested Citation

  • Bayoudh Feker & Houfi Mohamed Ali & Tissaoui Kais & Zamouri Sana, 2012. "An Empirical Analysis of the Excessive Volatility-Overconfidence Relationship: Evidence from the Tunisian Stock Market," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 2(1), pages 100-118.
  • Handle: RePEc:asi:aeafrj:v:2:y:2012:i:1:p:100-118:id:740
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