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Does Human Psychology Drive Financial Markets? Evidence from International Markets

Author

Listed:
  • Abderrazak Dhaoui

    (Department of Econometrics and Management, University of Sousse, Tunisia)

  • Naceur Khraief

    (University of Nice Sophia Antipolis, France)

Abstract

This paper provides the first evidence for empirical tests of the effect of rational expectations as well as behavioral biases, including among other animal spirits such as defined by Akerlof and Shiller (2009) on the variability of trading.We have used daily data for five international capital markets in developed countries. We find that the hypothesis of rationality losses of significance and cannot explain the evolution of trading. The economy is, however, driven by behavioral biases, including more especially animal spirits.

Suggested Citation

  • Abderrazak Dhaoui & Naceur Khraief, 2014. "Does Human Psychology Drive Financial Markets? Evidence from International Markets," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 2(3), pages 100-108, March.
    • Handle: RePEc:ijr:journl:v:2:y:2014:i:3:p:100-108
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    Citations

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    Cited by:

    1. Abderrazak Dhaoui & Nesrine Bensalah, 2017. "Asset valuation impact of investor sentiment: A revised Fama–French five-factor model," Journal of Asset Management, Palgrave Macmillan, vol. 18(1), pages 16-28, January.

    More about this item

    Keywords

    Rationality; Optimism; Pessimism; Spontaneous reaction; Overconfidence; Trading volume;
    All these keywords.

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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