Excess Volatility in the Tunisian Stock Market: Explanation by Behavioral Finance
Dhouha Hadidane Chkioua *
Department of Finance and Accounting, High School of Economic and Business Sciences, 4 Rue Abou Zakaria el Hafsi - 1089 Montfleury- ESSEC Tunis, University of Tunis, Tunisia.
*Author to whom correspondence should be addressed.
Abstract
In this paper, we tried to show the existence of excess volatility of stock prices in the Tunisian stock exchange during the period 2000 - 2017, by applying the variance bounds of Shiller. We used data on daily closing prices and the transaction volume of 22 companies listed on Tunisian Financial market during the period 2016/2017 to identify the relationship between over confidence bias and the Excess Volatility via the Granger causality test. Based on Chuang and Lee’s approach, we studied the effect of the excess confidence component on volatility by the E-GARCH Model (1.1). Our results show that high market volatility resulted from overconfident investors.
Keywords: International portfolio investment, international diversification, gravity model, information asymmetry, the E-GARCH model, causality tests