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

Godwin Musah, Daniel Domeher and Joseph Magnus Frimpong

African Journal of Economic and Management Studies, 2022, vol. 14, issue 1, 70-85

Abstract: Purpose - 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/approach - The 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. Findings - Investor 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/value - Despite 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.

Keywords: Presidential elections; Overconfidence bias; Sub-Saharan Africa; Stock markets (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ajemsp:ajems-03-2022-0075

DOI: 10.1108/AJEMS-03-2022-0075

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