Animal Spirits and Trading Volume in International Financial Markets between 2002 and 2011

Abstract

ABSTRACT

What Does Matter in Economy Today: When Human Psychology Drives Financial Markets

“…Markets are therefore driven by human psychological factors. This specific result is consistent with the observation shown in Dhaoui (2013), confirming the important role of behavioral components in describing the market functioning. In this vein, the authors argue that: "the behavioral based reaction induces a distorted prevision of the price evolution given the uncertainty in investors' beliefs and sentiments.…”

“…The model includes five independent variables: Rational expectation, Optimism, Pessimism, Overconfidence and Spontaneous reaction (ROPOS) in order to explain the trading volume such as measured approximately by the natural logarithm of trading volume in the date t ( . Previous study that used the same model is Dhaoui (2013), when investigating the sensitivity of trading volume to the "animal spirits" investor behavior using optimism, pessimism, overconfidence and spontaneous reaction as proxies for the human psychological variables from one hand and the rational expectation to test the efficient market hypothesis from the other hand. The estimated model is accordingly:…”

“…During the last five decades, a point of view commonly shared by many authors is that it becomes more difficult to understand how the economy really works (Akerlof and Shiller, 2009;Dhaoui et al (2013); Dhaoui (2013). The efficient market and the rational expectation hypotheses loss of significance and fail in explaining the return and trading volume behavior in the major international markets in both developed and emerging countries.…”

“…The efficient market and the rational expectation hypotheses loss of significance and fail in explaining the return and trading volume behavior in the major international markets in both developed and emerging countries. The authors attribute the dysfunction of economies and markets to human psychology, sentiments and feelings (Keynes, 1936); Akerlof and Shiller (2009) ;Dhaoui (2013). Variables such as overconfidence, (Daniel, Hirshleifer and Subrahmanyam, 2001) optimism, (Haruvy, Stahl and Wilson (1999), Weinstein (1980), Otten (1989), pessimism (De Bondt and Thaler (1985); Barberis Shleifer and Vishny (1998) or more largely animal spirits (Akerlof and Shiller, 2009) are particularly suggested to explain the disruption of evolution of the trading volumes and of the returns.…”

Empirical Linkages between Trading Volume and Stock Markets Shocks: When Sentiments Drive Investors’ Behavior

“…Among others, Hou and Li (2014), Dhaoui (2013) Dhaoui and Khraief (2014), Chen (2012), Campbell et al (1993), Chuang et al (2009), Griffin et al (2007), Karpoff (1987), Lee and Rui (2002), McMillan (2007) Al-Jafari and Tliti (2013) have focused on the nature of connections between trading volume and stock returns. However, even the importance of empirical findings, there is no consensus on empirical results of these studies, which show different causality directions.…”