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The Impact Of Investor Psychology On Stock Markets: Evidence From France

Author

Listed:
  • ABDERRAZAK DHAOUI
  • SAAD BOUROUIS
  • MELEK ACAR BOYACIOGLU

Abstract

This paper provides the first evidence for empirical sensitivity of trading volume to human psychological factors. We review therefore extensive evidence about how human psychology affects investor behavior and trading volume. Using the data for individual stocks listed on the CAC40 Stock Market over the period 2005-2011, results based on a fuzzy logic approach indicate a high sensitivity of trading volume to investor sentiments and beliefs. The sensitivity increases abnormally for the pessimism input variable. Taken together all results indicate that economy is highly driven by human psychologies, a result which is in conformity with the prediction of Keynes (1936) and Akerlof and Shiller (2009).

Suggested Citation

  • Abderrazak Dhaoui & Saad Bourouis & Melek Acar Boyacioglu, 2013. "The Impact Of Investor Psychology On Stock Markets: Evidence From France," Journal of Academic Research in Economics, Spiru Haret University, Faculty of Accounting and Financial Management Constanta, vol. 5(1 (June)), pages 35-59.
    • Handle: RePEc:shc:jaresh:v:5:y:2013:i:1:p:35-59
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    Citations

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    Cited by:

    1. Ali Shaddady & Mohammed Alsaggaf, 2020. "Issues that Matter When Behavioral Finance Factors Drive the Largest Initial Public Offering in the Saudi Financial Market," International Journal of Economics and Financial Issues, Econjournals, vol. 10(6), pages 106-117.
    2. 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.
    3. Abderrazak Dhaoui & Sami Bacha, 2017. "Investor emotional biases and trading volume’s asymmetric response: A non-linear ARDL approach tested in S&P500 stock market," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1274225-127, January.

    More about this item

    Keywords

    rationality; optimism; pessimism; overconfidence; trading volume; fuzzy logic.;
    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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