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Original Research Article
Overconfidence, trading volume and the disposition effect: Evidence from the Shenzhen Stock Market of China
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Abstract
Issues in Business Management and Economics
Vol.1 (7), pp. 163-175,November 2013
ISSN 2350-157X
Article ID JPR053, 13 pages
Copyright © 2014 Author(s) retain the copyright of this article. Author(s) agree that this article remain permanently open access under the terms of the Creative Commons Attribution License 3.0 International License
Original Research Paper
Overconfidence, trading volume and the disposition effect: Evidence from the Shenzhen Stock Market of China
Accepted 28 October,2013
Salma Zaiane
Faculty of Economics and Management Sciences of Tunis – Tunisia.
Author E-mail: zaiane_salma(at)yahoo.com
Tel.:+21628728633
Abstract
It has been a challenge for financial economists to explain some stylized facts observed on 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. Otherwise, excess volume can also be explained by disposition effect describing the tendency to sell stocks that have appreciated in price, but not those that have depreciated in price.The aim of our paper is to study the impact of the phenomenon of overconfidence and the disposition effect on the trading volume and their role in the formation of the excess volume on the Chinese stock market. We find a strong evidence of the overconfidence hypothesis. Besides, we show no evidence of the disposition effect on individual securities.
Key words: overconfidence, disposition effect, trading volume, emergent market
JEL classification: G11; G12
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