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Presidential election uncertainty and investor overconfidence bias in sub-Saharan African stock markets

Presidential election uncertainty and investor overconfidence bias in sub-Saharan African stock... The purpose of this paper is to investigate overconfidence bias and the effect of presidential elections on investor overconfidence bias in sub-Saharan African stock markets.Design/methodology/approachThe study uses the vector autoregressive (VAR) model and its associated impulse response functions to investigate overconfidence bias. Furthermore, we make use of OLS regressions to examine the effect of presidential elections on investor overconfidence bias.FindingsInvestor overconfidence bias is present in the markets of Ghana and Tanzania suggesting that the phenomenon persists in sub–Saharan Africa's small markets. We also find that post-presidential election periods have a dampening effect on investor overconfidence in a country where there is less post-election uncertainty.Originality/valueDespite the previous studies on investor overconfidence bias in sub-Saharan Africa, this paper to the best of the authors’ knowledge, is the first to investigate investor overconfidence bias in the context of presidential elections. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png African Journal of Economic and Management Studies Emerald Publishing

Presidential election uncertainty and investor overconfidence bias in sub-Saharan African stock markets

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
2040-0705
DOI
10.1108/ajems-03-2022-0075
Publisher site
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Abstract

The purpose of this paper is to investigate overconfidence bias and the effect of presidential elections on investor overconfidence bias in sub-Saharan African stock markets.Design/methodology/approachThe study uses the vector autoregressive (VAR) model and its associated impulse response functions to investigate overconfidence bias. Furthermore, we make use of OLS regressions to examine the effect of presidential elections on investor overconfidence bias.FindingsInvestor overconfidence bias is present in the markets of Ghana and Tanzania suggesting that the phenomenon persists in sub–Saharan Africa's small markets. We also find that post-presidential election periods have a dampening effect on investor overconfidence in a country where there is less post-election uncertainty.Originality/valueDespite the previous studies on investor overconfidence bias in sub-Saharan Africa, this paper to the best of the authors’ knowledge, is the first to investigate investor overconfidence bias in the context of presidential elections.

Journal

African Journal of Economic and Management Studies – Emerald Publishing

Published: Feb 24, 2023

Keywords: Presidential elections; Overconfidence bias; Sub-Saharan Africa; Stock markets

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