Based On Theoretical And Empirical Study Of Stock Market Reaction Behavior Of The Bsv, Dhs, And Hs Models

With the extensive and intensive study in the real financial market, researchers have found more and more anomalies that are hard to be explained by standard finance which is based on the EMH. Recently, behavioral finance which is the combination of finance and psychology has been developed quickly. Behavioral finance can give reasonable explanation to the anomalies in financial market with the application of personal decision research coming from psychology. The overreaction and underreaction phenomena in financial market is important to judge if the market is consistent with the EMH. In order to explain the overreaction and underreaction phenomena, behavioral finance sets up several theoretical models including BSV model, DHS model, and HS model. Though these models work well on the level of their hypothesis, what's more important in explaining the inner mechanism of overreaction and underreaction, is the consistency of the model and the behavior of the market, especially the relationship between the models and investors' behavior in stock market.Based on these backgrounds, I talked about the history of behavioral finance in chapter 1. Chapter 2 focused on the theoretical system of behavioral finance, including the basic theory, EMH related hot topics (including overreaction and underreaction), and theory constructing of the development of behavioral finance.Chapter 3 defined the phenomena of overreaction and underreaction and discussed the advantage and deficiency of three commonly used models-BSV, DHS, and HS. Chapter 4 gave detailed description of the basic behavioral hypothesis of these models and further identified their applicability based on psychological theory and possible influence of market on behavior of investors.Chapter 5 discussed the reasonability of the identification of these models based on the reality of Chinese stock market and also investigated the behavior of the investors in Chinese stock market with questionnaire, especially the factors in BSV, DHS, and HS models. The applicability of these models were also discussed after the analysis of the questionnaires and concluded that HS model could give reasonable explanation to overreaction and underreaction phenomena in Chinese stock market. In chapter 6, we analyzed overreaction and underreaction phenomena present in Chinese stock market using event study and explained these phenomena with HS model reasonably. The event is the announcement of annual income statement.