Stock Market Under The Background Noise Feedback Mechanism

The feedback mechanism in the stock market is an established and still fashionable topic. The rational study of this topic started in the beginning of the nineties of the 20th century. De long, together with three others, can be regarded as the fathers of the studies of this topic. Although great progress had been made in this field, Robert Shiller claimed in 2002 that little had been done as far as preciseness and rational studies are concerned.The present dissertation, on the basis of the latest studies in this field and with a lot of statistics and test of the market, intends to make it known that Noise and Noise Trading is the usual state of the stock market and that the so-called strong effective market is unusual and temporary. So my study is established on the basis of Noise.The first main conclusion that I made is about the feedback mechanism on the administrative levels of trading. The main manifest is positive feedback trading which have the property of self-fulfillment, the property of noise trade risk madding and the property of momentum effect.In this part, I have made an important proposition that the stock market satisfies the condition of " feedback imitation and accelerating risk model|" which means that risk can be imitated and contagion.The second main conclusion that I made is about the feedback mechanism on the administrative levels of industries in the form of investment and financing. This paper revises and develops Tobin' s Q Theory by pointing out that market can still influence investment even in the state of Noise and Noise Trading. I found that under the modern system of enterprise and financial market, especially under the system of ESO, the stock price can lead the change of investment by the effect on the behavior of executives, by the cost of investment, and by the sales and the reliability of enterprise. And more, the speculation of industries comes to the world.The third main conclusion that I made is about the feedback mechanism on the administrative levels of wealth effect. I have made a model to estimate the pure wealth effect of all the main counties, which is easy and simple yet practicable and effective. And I have got a formula of the strength of feedback by the wealth effect. Also in this chapter I have made a proposition that the stock wealth effect displayed less than its reality.On the explanation of excess volatility, I have got two new ways, i.e. the feedback imitation and accelerating risk model| and the industry speculation.Finally I have given a series of new explanation of puzzle of ERP, mainly by the relative advantage of listed companies, by the accumulation the advantage of listed companies under the noise, and by the not-so- efficiency company can survive in the history.