OVERCONFIDENCE AND TRADING VOLUME: EVIDENCE FROM
                AN EMERGENT MARKET

                                 Zaiane Salma, Lecturer PhD
                   Faculty of Economics and Management Sciences of Tunis
                                  Zaiane_salma@yahoo.com

                              Abaoub Ezzeddine, Professor PhD
                   Faculty of Economics and Management Sciences of Tunis
                               Ezzeddine. Abaoub@Fseg.rnu.tn


ABSTRACT:It has been a challenge for financial economists to explain some stylized facts
observed in securities markets, among them, high levels of trading volume. The most
prominent explanation of excess volume is overconfidence. High market returns make
investors overconfident and as a consequence, these investors trade more subsequently and
make some transactions more aggressively. The aim of our paper is to study the impact of the
phenomenon of overconfidence on the trading volume and its role in the formation of the
excess volume on the Tunisian stock market. Based on the work of Statman, Thorley and
Vorkink (2006) and by using VAR models and impulse response functions, we find a little
evidence of the overconfidence hypothesis when we use volume (shares traded) as proxy of
trading volume.

Keywords: overconfidence, disposition effect, trading volume, emergent market

JEL Codes: G11; G12