contribution of the overconfidence bias to the explanation of the volatility of the returns of the Algerian equity market
DOI:
https://doi.org/10.59051/joaf.v9i2.165Keywords:
Overconfidence bias, excessive volatility, DZAIRINDEX, algerian stock marketAbstract
In the perspective of examining the Algerian equity market, we study the contribution of the overconfidence bias to the explanation of the volatility of the returns of the main market estimated from the DZAIRINDEX index. Such an essay is, to our knowledge, unpublished, as far as empirical studies on the Algiers Stock Exchange are concerned.
We conducted two successive empirical tests with the aim of verifying, first, the existence of a relationship between the transaction volume and the volatility of returns on the Algerian market, through the estimation of a ARMA(4,4)-EGARCH(1-1) model. The significance of this relationship allowed us to initiate the second test which examin the causality in the sense of Granger between these two variables, under the hypothesis that Algerian investors over-react to their private information.
The results obtained show that the bias of overconfidence does not cause, in the short term, the volatility of the returns of the Algerian stock market, but contributes to explain it, in line with other factors.
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Copyright (c) 2018 Mohamed KHALED
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