DOI: 10.1108/rbe-08-2025-0068 ISSN: 2326-6198

Overconfidence bias and stock market volatility during crises: developed, emerging and frontier markets

Manel Mahjoubi, Jamel Eddine Henchiri

First, this paper aims to examine the presence of over-confidence bias in developed, emerging and frontier markets, for the period January 2006 to June 2020. For this the authors used the toda test Yamamoto. Indeed, the authors found that the over-confidence bias is more noticeable in developed markets than in emerging markets. Furthermore, this bias is almost nonexistent in frontier markets. Second, this study analyzes the impact of investor overconfidence on stock market volatility developed and emerging during several crises. This article examines this impact, using GARCH model and OLS-panel model. The authors have noticed that in times of crisis, the bias of overconfidence does not explain the volatility because of the loss of confidence of investors blamed on their fear and their lack of confidence the authors have found that this result is more noticeable on developed markets than in emerging markets.

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