Investor overconfidence in the South African exchange traded fund market

Cogent Economics & Finance

Damien Kunjal¹  Faeezah Peerbhai² 

[1] Department of Business Management, University of the Free State, Bloemfontein South Afric;School of Accounting, Economics and Finance, University of KwaZulu-Natal, South Afric;

关键词: behavioural finance;    exchange traded fund;    market return;    market turnover;    overconfidence bias;   

DOI  :  10.1080/23322039.2021.1978190

来源: Taylor & Francis

【 摘 要 】

Exchange Traded Funds (ETFs) have proven to be extremely popular amongst both retail and institutional investors. The increasing interest in this asset class may incite overconfidence in its’ investor base, which could lead to undesirable market effects such as security mispricing, excess trading volumes, and exacerbated market volatility. This study aims to examine the South African ETF market for presence of investor overconfidence. To achieve this objective, Vector Autoregression (VAR) models and their associated impulse response functions are employed to examine the relationship between the current trading activity and the historical market return. Consistent with the overconfidence hypothesis, a positive and significant relationship between current market turnover and lagged market returns is found for both ETFs with domestic benchmarks and ETFs with international benchmarks. Further analysis of panel VAR models and their associated impulse response functions suggest that the overconfidence bias also influences the trading activities of individual ETFs. These findings have important implications for various market participants.

【 授权许可】

CC BY