Does Human Psychology Drive Financial Markets? Evidence from International Markets

Abderrazak Dhaoui and Naceur Khraief

International Journal of Economics and Empirical Research (IJEER), 2014, vol. 2, issue 3, 100-108

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.

Keywords: Rationality; Optimism; Pessimism; Spontaneous reaction; Overconfidence; Trading volume (search for similar items in EconPapers)
JEL-codes: G02 G11 G12 G14 G17 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ijr:journl:v:2:y:2014:i:3:p:100-108

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