| China's stock market has been an important part of economy since its existence. It is undoubted that China's stock market has developed very rapidly and made great contribution to national economy. After a dozen years' development, the listed companies have rocketed to over 1000 with total market of ?800 billions, covering a big part of GDP. Given the fact that the stock market is undergoing great reform and development, it is necessary and important to study the formation mechanism of China's stock price. Many studies have been made on this subject and lots of fruits have been attained. B there is no integrated and systemical work which studies on the formation mechanism of China's stock price. So, this paper tries to reveal the formation mechanism of China's stock price on the base of theoretical and empirical research.The paper covers ten chapters which can be divided into seven parts. The first part, which is also the first chapter, gives the comments on the theoretical research about the formation mechanism of stock price, such as MPT, EMH, CAPM, behavioral finance, ARCH and market microstructure theory. These authentic proof models provide a basis of the analysis in the paper. And the first part also gives the comments on the research of domestic scholars.The second part which contains two chapters establishes the method to analyze the formation mechanism of China's stock price. In the second chapter, the analysis of supply-demand market mechanism, unefficient market model and zero sum game model, indicates the formation mechanism of stock price is established on the basis of information, participants and the relationship between trade volume and price. In the third chapter, we describe the characters of China's stock market in stock market position, development status, stock exchange system and stock price fluctuation.The third part, which also contains two chapters, the fourth chapter and the fifth chapter dewell on the relationship between information and stock price. In the fourth chapter, we find that stock market indexes are positively correlated with economic indexes and the economic variables are the granger courses of stock price fluctuation. In this chapter, Levine's theory about stock market function for facilitating economic growth is tested using the data of China. Based on the results,we find that stock market and banks in China have different functions, and stock market responses to the economic development, but now financial system in China is bank based and the stock market does not function very well because of its size. In the fifth chapter, we find that the growth rates is the most important factor of value of stock.The following part deals with the investor behavior in China's stock market by examining the behavior of security analysts and funds. On the one hand, we find that security analysts' recommendations can neither lead to abnormal returns nor influence price fluctuation. On the other hand, we use risk-adjusted profit to test the funds' performance persistence and find that funds can not beat the market without favorite treatment, such as subscribing IPO shares. Their performance is affected by market.The fifth part examines the relationship between trade price and volume. Firstly, we study time factors which influence the price and volume fluctuation, then we adjust this influence. Secondly, we divide volume into two parts: the volume which can be anticipated and the volume which can not. And there exist linear and nonlinear relationships between volume which can not be anticipated and price fluctuation. But generally speaking, the most important factor is the long-run trend but not the short fluctuation.In the sixth part, that is the ninth chapter, we discuss the conventional distinction between bank-based and market-centered financial systems and find that investor protection is the key of corporate governance and put forward some resolvents. In this chapter, we also deduct that the cause of violation is low cost by game model.The last part, namely th...
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