Overconfidence as a determinant of volatility in Latin American stockmarkets

Arturo Lorenzo Valdés ()
Additional contact information
Arturo Lorenzo Valdés: Universidad de las Américas Puebla San Andrés Cholula, Puebla, México

Contaduría y Administración, 2016, vol. 61, issue 2, 324–333

Abstract: We propose an EGARCH model with a standardized Student’s t distribution for the innovations. The model is used to describe the behavior of the volatility of 6 Latin American stock indices returns. In the conditional variance equation we incorporated factors that represent investor’s overconfidence to determine whether this cognitive bias affects the volatility of returns. The results suggest that: 1) The return series analyzed can be adequately described by the proposed model, 2) the property of leverage effect is observed in the return series, of Chile, Colombia, Mexico and Peru; 3) in general we can say that overconfidence is a determinant of volatility, and 4) in times of crisis the confidence is lost in financial markets, mainly the Mexican.

Keywords: Overconfidence; Behavioral finance; Volatility; EGARCH (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.cya.unam.mx/index.php/cya/article/view/784/816 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nax:conyad:v:61:y:2016:i:2:p:324-333

Access Statistics for this article

Contaduría y Administración is currently edited by Francisco López-Herrera (Editors in Chief)

More articles in Contaduría y Administración from Accounting and Management Contact information at EDIRC.
Bibliographic data for series maintained by Alberto García-Narvaez (Technical Editor) ().