Study of the Dynamics of Asset Prices by a Behavioral Approach: Theoretical Foundations&Empirical Investigation

We study; according to the work of Statman, Thorley& Vorkink (2004), Glaser& Weber (2004) and Chuang and Lee (2006), the dynamic relationship between overconfidence of investors and volume of transactions. This study aims to show first that overconfidence is a systematic cognitive bias most investors suffered the effect of which can affect the efficiency of financial markets. We test this hypothesis for a sample of 35 Tunisian companies over a period from 2000 to 2010 according to frequency: daily, weekly and monthly and using a range of econometric tests or tests of Granger causality, then the vector autoregression VAR modeling and impulse response functions associated. We prove the presence of excess of confidence in the Tunisian market through a significant relationship Granger returns to the current market volume of transactions. In addition, we can test the hypothesis that overconfidence allows encourage the volume of transactions. Still more, and the fact that these results support the hypothesis of the disposition effect, we argue our study distinguishing overconfidence of this bias. Following the positive and significant relationship between past market returns and individual trading volume in the presence of individual past performance, we can validate the overconfidence hypothesis and to distinguish it from the effect of this provision which allows to conclude that the exchange market activity is not a simple summation of disposition effect individual securities.