Title: Investor's overconfidence and trading volume in the Tunisian market

Authors: Wafa Haj Mohamed; Faten Lakhal; Aymen Ajina

Addresses: Faculty of Economic Sciences and Management, University of Sfax, Tunisia ' Higher Institute of Management, University of Sousse, Sousse, Tunisia ' FSEG-University of Sousse, Tunisia; Arab East Colleges, Riyadh

Abstract: A sample of 35 Tunisian companies is designed to study the relationship between investors' overconfidence and trading volume by distinguishing it from the disposition effect. We use VAR model in two versions. VAR market model shows a significant and positive correlation between past market return and current market turnover. This result validates overconfidence hypothesis and disposition effect. Therefore, we use a securities VAR model that shows a significant and positive correlation between past market return and current securities turnover in presence of securities returns for some companies. This result validates overconfidence hypothesis and not disposition effect. Other companies are characterised by a disposition effect and not by overconfidence since securities VAR model shows a significant and positive correlation between individual past returns and their current turnover in presence of past market returns. We conclude that the exchange activity is not a simple summation of disposition effect of individual securities.

Keywords: efficiency; behavioural finance; overconfidence; trading volume; disposition effect; Tunisia.

DOI: 10.1504/EMJM.2017.084270

EuroMed Journal of Management, 2017 Vol.2 No.1, pp.59 - 76

Received: 28 Jun 2016
Accepted: 06 Oct 2016
Published online: 23 May 2017 *

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