Open AccessDisposition Effect and Return Predictability in the Tunisian Stock Market
Author(s) -
Cheïma Hmida,
Ramzi Boussaidi
Publication year - 2017
Publication title -
international finance and banking
Language(s) - English
Resource type - Journals
ISSN - 2374-2089
DOI - 10.5296/ifb.v4i1.10550
Subject(s) - disposition effect , predictability , stock (firearms) , economics , disposition , momentum (technical analysis) , monetary economics , behavioral economics , financial economics , stock exchange , stock market , market efficiency , finance , mechanical engineering , psychology , paleontology , social psychology , context (archaeology) , physics , horse , quantum mechanics , engineering , biology
The behavioral finance literature has documented that individual investors tend to sell winning stocks more quickly than losing stocks, a phenomenon known as the disposition effect, and that such a behavior has an impact on stock prices. We examined this effect in the Tunisian stock market using the unrealized capital gains/losses of Grinblatt & Han (2005) to measure the disposition effect. We find that the Tunisian investors exhibit a disposition effect in the long-run horizon but not in the short and the intermediate horizons. Moreover, the disposition effect predicts a stock price continuation (momentum) for the whole sample. However this impact varies from an industry to another. It predicts a momentum for “manufacturing” but a return reversal for “financial” and “services”.