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The Reversal of Stock Market Trends as a Behavioral Bias: Evidence from Tunisian Stock Exchange

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  • Hsini Mosbeh
  • Kouki Mondher

Abstract

This paper examines the behavioral bias in Tunisia, a country with a small stock market in terms of capital, but surprisingly dynamic in comparison to other emerging markets. Our study is consistent with Jegadeesh & Titman (1993)' approach as presented to highlight an analysis of such reversal phenomena of portfolio returns, and provides explanatory factors to the so-called market trends reversal. The empirical investigation is based on a weekly database for a period from January 2002 to January 2013 related to stock prices and index values of market capitalization (TUNINDEX). The empirical test demonstrates the existence of winner-loser phenomenon in accordance with over-reaction hypothesis stating that portfolios with the worst past performance outperform, during the subsequent periods, those having produced best past performance and vice versa.

Suggested Citation

  • Hsini Mosbeh & Kouki Mondher, 2016. "The Reversal of Stock Market Trends as a Behavioral Bias: Evidence from Tunisian Stock Exchange," Business and Economic Research, Macrothink Institute, vol. 6(2), pages 13-29, December.
    • Handle: RePEc:mth:ber888:v:6:y:2016:i:2:p:13-29
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    References listed on IDEAS

    as
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    2. Lee, Charles M C & Shleifer, Andrei & Thaler, Richard H, 1991. "Investor Sentiment and the Closed-End Fund Puzzle," Journal of Finance, American Finance Association, vol. 46(1), pages 75-109, March.
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    4. X. Frank Zhang, 2006. "Information Uncertainty and Stock Returns," Journal of Finance, American Finance Association, vol. 61(1), pages 105-137, February.
    5. Albert Wang, F., 1998. "Strategic trading, asymmetric information and heterogeneous prior beliefs," Journal of Financial Markets, Elsevier, vol. 1(3-4), pages 321-352, September.
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    More about this item

    Keywords

    Behavioral bias; Reversal; Stock market trend; Momentum effect;
    All these keywords.

    JEL classification:

    • 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
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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