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THE EFFECT OF INVESTOR'S BEHAVIORAL BIASES ON TRADING VOLUME OF G7 AND BRICS CAPITAL MARKETS

Year 2019, Volume: 3 Issue: 5, 1 - 13, 01.06.2019

Abstract

This study aims to test the effect of investor's behavioral biases on trading volume in G7 and BRICS countries stock markets. A linear regression model is used to test the relationship between trading volume and the rational expectations, overconfidence, excessive optimism, and excessive pessimism. We found that there are certain similarities and differences among developed and developing capital markets. Our analysis revealed that the rationality hypothesis can be rejected for all the markets except Germany. The Italian and Russian markets show no influence of investor's biases on trading volume. We found that six of the markets have the similar behavioral characteristics. Excessive optimism and excessive pessimism have a significant effect on trading volume in Canada, France, United Kingdom, United States, Brazil and South Africa.

References

  • Ackert, L. F., & Deaves, R. (2010). Behavioral Finance: Psychology. Decision-Making, and Markets, 97-99.
  • Altuntaş, S.T., Sarikovanlik, V., & Nertil, M. E. R. A. (2017). Effects of Expectations and Confidence Indices on Financial Markets. [Special Issue]. The Journal of Accounting and Finance 142.
  • Concetto, C. L., & Ravazzolo, F. (2019). Optimism in Financial Markets: Stock Market Returns and Investor Sentiments. Journal of Risk and Financial Management, 12(2), 1-14.
  • Chen, S. S. (2012). Revisiting the empirical linkages between stock returns and trading volume. Journal of Banking & Finance, 36(6), 1781-1788.
  • Chou, R. K., & Wang, Y. Y. (2011). A test of the different implications of the overconfidence and disposition hypotheses. Journal of Banking & finance, 35(8), 2037-2046.
  • Dhaoui, A. (2015). What does matter in economy today: When human psychology drives financial markets. Arab Economic and Business Journal, 10(1), 39-47.
  • Dhaoui, A., Bourouis, S., & Boyacioglu, M. A. (2013). The Impact of Investor Psychology on Stock Markets: Evidence from France. Journal of Academic Research in Economics, 5(1).
  • Dhaoui, A. (2013). Animal spirits and trading volume in international financial markets between 2002 and 2011. Journal of Economic and Social Studies, 3(1), 163. Dhaoui, A., & Bacha, S. (2017). Investor emotional biases and trading volume’s asymmetric response: A non-linear ARDL approach tested in S&P500 stock market. Cogent economics & finance, 5(1), 1274225.
  • Galanidis, I. (2017). The effect of Behavioral Finance on Capital Markets. The case of PIIGS (Portugal, Italy, Ireland, Greece, Spain).
  • Glaser, M., & Weber, M. (2007). Overconfidence and trading volume. The Geneva Risk and Insurance Review, 32(1), 1-36.
  • Isidore, R., & Christie, P. (2019). The relationship between the income and behavioural biases. The bi-annual academic publication of Universidad ESAN, 24(47).
  • Khcherem, F., & Bouri, A. (2009). Fuzzy logic and investment strategy. Global Economy & Finance Journal, 2(2), 22-37.
  • Muth, J. F. (1961). Rational expectations and the theory of price movements. Econometrica: Journal of the Econometric Society, 315-335.
  • Oprean, C. (2015). Theoretical And Methodological Proposals Regarding The Informational Efficiency Of Financial Markets. Revista Economica, 67(6), 66-80.
  • Pan, W. F. (2020). Does Investor Sentiment Drive Stock Market Bubbles? Beware of Excessive Optimism. Journal of Behavioral Finance, 21(1), 27-41.
  • Shefrin, H., & Statman, M. (1994). Behavioral capital asset pricing theory. Journal of financial and quantitative analysis, 29(3), 323-349. Fama, E. (1998). Market efficiency, long term returns, and behavioral finance. The Journal of Finance, 49(3), 283–306.
  • Shefrin, H., & Statman, M. (2011). Behavioral finance in the financial crisis: market efficiency, Minsky, and Keynes. Santa Clara University, November.
  • Shefrin, H. (2002). Beyond greed and fear: Understanding behavioral finance and the psychology of investing. Oxford University Press on Demand.
  • Smith, A. (2010). The theory of moral sentiments. Penguin.
  • Smith, A. (1776). The Wealth of Nations. London.: Strahan and T. Cadell.
  • Solis, M., & Urata, S. (2018). Abenomics and Japan's trade policy in a new era. Asian Economic Policy Review, 13(1), 106-123.
  • Suto, M., & Toshino, M. (2005). Behavioural biases of Japanese institutional investors: Fund management and corporate governance. Corporate Governance: An International Review, 13(4), 466-477.

YATIRIMCILARIN DAVRANIŞSAL YANILGILARININ G7 VE BRICS SERMAYE PİYASALARI İŞLEM HACİMLERİ ÜZERİNE ETKİSİ

Year 2019, Volume: 3 Issue: 5, 1 - 13, 01.06.2019

Abstract

Bu çalışmanın amacı borsada alım satım kararlarını verirken G7 ve BRICS ülkelerinde yatırımcıların davranışsal önyargılarının işlem hacmine etkisini test etmektir. Bu ilişkiyi test etmek için doğrusal regresyon modelinden faydalanılarak işlem hacmi ve bağımsız değişken olarak rasyonel beklenti, aşırı güven, aşırı iyimserlik ve aşırı kötümserlik, her bir ülkenin piyasa endeksinin günlük getirileri ile test edilmektedir. Çalışma neticesinde gelişmiş ve gelişmekte olan ülke piyasaları arasında benzerlik ve farklılıklar tespit edilmektedir. Rasyonalite hipotezinin Almanya haricindeki tüm pazarlar için reddedilebileceğini, İtalyan ve Rus piyasalarının da yatırımcıların rasyonalite üzerinde herhangi bir etkisinin olmadığı tespit edilmiştir. Altı ülke piyasasının benzer sonuçlar elde dildiği ve aşırı iyimserlik ve aşırı kötümserlik yanılgılarının Kanada, Fransa, Birleşik Krallık, ABD, Brezilya ve Güney Afrika’da işlem hacmi üzerinde belirgin etkiye sahip olduğu tespit edilmektedir.

References

  • Ackert, L. F., & Deaves, R. (2010). Behavioral Finance: Psychology. Decision-Making, and Markets, 97-99.
  • Altuntaş, S.T., Sarikovanlik, V., & Nertil, M. E. R. A. (2017). Effects of Expectations and Confidence Indices on Financial Markets. [Special Issue]. The Journal of Accounting and Finance 142.
  • Concetto, C. L., & Ravazzolo, F. (2019). Optimism in Financial Markets: Stock Market Returns and Investor Sentiments. Journal of Risk and Financial Management, 12(2), 1-14.
  • Chen, S. S. (2012). Revisiting the empirical linkages between stock returns and trading volume. Journal of Banking & Finance, 36(6), 1781-1788.
  • Chou, R. K., & Wang, Y. Y. (2011). A test of the different implications of the overconfidence and disposition hypotheses. Journal of Banking & finance, 35(8), 2037-2046.
  • Dhaoui, A. (2015). What does matter in economy today: When human psychology drives financial markets. Arab Economic and Business Journal, 10(1), 39-47.
  • Dhaoui, A., Bourouis, S., & Boyacioglu, M. A. (2013). The Impact of Investor Psychology on Stock Markets: Evidence from France. Journal of Academic Research in Economics, 5(1).
  • Dhaoui, A. (2013). Animal spirits and trading volume in international financial markets between 2002 and 2011. Journal of Economic and Social Studies, 3(1), 163. Dhaoui, A., & Bacha, S. (2017). Investor emotional biases and trading volume’s asymmetric response: A non-linear ARDL approach tested in S&P500 stock market. Cogent economics & finance, 5(1), 1274225.
  • Galanidis, I. (2017). The effect of Behavioral Finance on Capital Markets. The case of PIIGS (Portugal, Italy, Ireland, Greece, Spain).
  • Glaser, M., & Weber, M. (2007). Overconfidence and trading volume. The Geneva Risk and Insurance Review, 32(1), 1-36.
  • Isidore, R., & Christie, P. (2019). The relationship between the income and behavioural biases. The bi-annual academic publication of Universidad ESAN, 24(47).
  • Khcherem, F., & Bouri, A. (2009). Fuzzy logic and investment strategy. Global Economy & Finance Journal, 2(2), 22-37.
  • Muth, J. F. (1961). Rational expectations and the theory of price movements. Econometrica: Journal of the Econometric Society, 315-335.
  • Oprean, C. (2015). Theoretical And Methodological Proposals Regarding The Informational Efficiency Of Financial Markets. Revista Economica, 67(6), 66-80.
  • Pan, W. F. (2020). Does Investor Sentiment Drive Stock Market Bubbles? Beware of Excessive Optimism. Journal of Behavioral Finance, 21(1), 27-41.
  • Shefrin, H., & Statman, M. (1994). Behavioral capital asset pricing theory. Journal of financial and quantitative analysis, 29(3), 323-349. Fama, E. (1998). Market efficiency, long term returns, and behavioral finance. The Journal of Finance, 49(3), 283–306.
  • Shefrin, H., & Statman, M. (2011). Behavioral finance in the financial crisis: market efficiency, Minsky, and Keynes. Santa Clara University, November.
  • Shefrin, H. (2002). Beyond greed and fear: Understanding behavioral finance and the psychology of investing. Oxford University Press on Demand.
  • Smith, A. (2010). The theory of moral sentiments. Penguin.
  • Smith, A. (1776). The Wealth of Nations. London.: Strahan and T. Cadell.
  • Solis, M., & Urata, S. (2018). Abenomics and Japan's trade policy in a new era. Asian Economic Policy Review, 13(1), 106-123.
  • Suto, M., & Toshino, M. (2005). Behavioural biases of Japanese institutional investors: Fund management and corporate governance. Corporate Governance: An International Review, 13(4), 466-477.
There are 22 citations in total.

Details

Primary Language English
Subjects Finance
Journal Section Articles
Authors

Lamis Alshalabı This is me 0000-0002-4416-1696

Serkan Çankaya 0000-0003-3010-0697

Publication Date June 1, 2019
Submission Date March 25, 2020
Published in Issue Year 2019 Volume: 3 Issue: 5

Cite

APA Alshalabı, L., & Çankaya, S. (2019). THE EFFECT OF INVESTOR’S BEHAVIORAL BIASES ON TRADING VOLUME OF G7 AND BRICS CAPITAL MARKETS. İstanbul Ticaret Üniversitesi Girişimcilik Dergisi, 3(5), 1-13.