Adaptive Market Hypothesis And Overconfidence Bias

Manel Mahjoubi (1) , Jamel Eddine Henchiri (2)
(1) Agence Nationale de Métrologie , Tunisia
(2) Agence Nationale de Métrologie , Tunisia


This paper examines the effect of excessive investor confidence on market efficiency. We study this impact for 21 developed markets and 25 emerging markets for a period from January 2006 until June 2020. First, we estimate weak market efficiency using the auto-correlation test (Ljung-Box, 1978). Thus, based on the adaptive approach, we assume that the overconfidence of investors has a negative impact on market efficiency. Concerning the over-confidence variable; we use the transaction volume decomposition method of Chuang and Lee (2006). Finally, we used the logit panel model to study the impact the impact of investor overconfidence on market efficiency. The result shows that during our study period, the trust bias had no impact either on the efficiency of developed markets or on the efficiency of emerging markets. We attribute this result to successive crises during our study period, including the subprime crisis, the eurozone crisis, the stock market crash in China, and the COVID crisis, which likely caused investors to become pessimistic and lose confidence in the stock market.

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Manel Mahjoubi (Primary Contact)
Jamel Eddine Henchiri
Author Biographies

Manel Mahjoubi, Agence Nationale de Métrologie

Dr Maneel Mahjoubi is currently an Assistant at the Higher Institute of Management- University of Gabes, in Tunisia. He obtained his PhD in finance from Faculty of Economics and Management - University of Sfax, in Tunisia. Member at the Research Unit on Research, Business and Decisions (UR-RED), in Higher Institute of Management of Gabes (University of Gabes, in Tunisia). He also participated in several high-profile conferences.

Jamel Eddine Henchiri, Agence Nationale de Métrologie

Pr. Jamel Eddine Henchiri, is currently a Professor at the Higher Institute of Management- University of Gabes, in Tunisia.Also, he is the director of the Research Unit on Research, Business and Decisions (UR-RED), in the University of Gabes, in Tunisia). Since its creation in 2013. In addition, he has been the president of the scientific journal Journal of Academic Finance (JoAF), since 2010. Also, he is the founder and main organizer of the international conference CSIFA: International Scientific Conference on Finance and Insurance, since 2006, and participated in several high-profile conferences. He was also appointed director of the Higher Institute of Management- University of Gabes, in Tunisia, during the years 2013 and 2014. He obtained his PhD in Management Science from Rennes University in France (1 IGR-IAE de Rennes: Rennes, Bretagne, FR).

Mahjoubi, M., & Henchiri, J. E. (2024). Adaptive Market Hypothesis And Overconfidence Bias. ECONOMÍA CHILENA, 27(1), 9–19.

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