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Low Efficiency Of Stock Market Investment Theory And Institutional Innovation

Posted on:2006-08-19Degree:DoctorType:Dissertation
Country:ChinaCandidate:Y S LiuFull Text:PDF
GTID:1116360155460626Subject:National Economics
Abstract/Summary:PDF Full Text Request
In this article, the author, taking the stock market in China as theexample, puts forward a stock investment theory of behavioral relatively efficient market, after studying the investment theories in low-efficient stock market. The author also studies the problems of current China stock market, the corresponding reasons and solutions. Nine chapters are included in this paper, except the preface.In Chapter 2, the author summarizes the stock investment theories comprehensively. These theories, by the author, are divided into five categories. The first is technical analysis theory. The second is intrinsic value investment theory. Market comparison theory is the third. The fourth is neo-classical stock investment theory. And the last is behavioral investment theory. The author, in this chapter, briefly mentions the first three kinds of stock investment theories and then, summarizes the neo-classical stock investment theory and behavioral investment theory more systematically.In Chapter 3, the author studies the efficiency of pricing in China stock market. Between China stock market and the stock markets in other countries there are many differences, in which the most special is that China stock market is a both emerging and transitional market. That China stock market is low-efficient is not only the instinctive perceive of the masses but also attains the supports from academe. What is argued academically is whether China stock market has became one weak-form efficient market. And there are no dissidences on that the market has not changed into semi-strong form efficient market and strong-form efficient market.The author, in Chapter 4, puts forward a investment theory of behavioral relatively efficient market. Because China stock market is low-efficient in pricing, the neo-classical stock investment theory, which is based on the efficient market theory and becomes dominant in academe, does not beseem us to support the investment practices in China stock market. Not many positive results can be achieved by applying the neo-classical stock investment theory and related models, we therefore need new stock investment theory to instruct the investment practices in China stock market. The author attempts to bring forward the stock investment theory of behavioral relatively efficient market. Firstly, the market is divided into three categories of absolutely efficient market , relatively efficient market, behavioral relatively efficient market. Then, set forth a hypothesis of behavioral relatively efficient market and a investmenttheory of behavioral relatively efficient market. Finally, compare the stock investment theory of behavioral relatively efficient market and the neo-classical stock investment theory. The investment theory of behavioral relatively efficient market, in detail, is separated into four stages: 1st stage, evaluate intrinsic investment value of every stock and average intrinsic investment value in the market and, calculate every stock' s ratio of market price to intrinsic value (PIV) and average ratio of market price to intrinsic value in the market; 2nd stage, at some time point, according to the logic of market itself, list all the psychological and behavioral preference factors of investors, that influence respective stock price, measure the impact factors of investor psychological and behavioral preference on respective stock price, and calculate the behavioral PIV of every stock and estimate the price; 3rd stage, if short-selling mechanism exists in stock market, buy the share with the lowest behavior PIV and sell the share with the highest behavior PIV, to arbitrage; 4th stage, if there is no short-selling mechanism in stock market, for example, in China stock market, it will be difficult to practice simple arbitrage strategies. At the same time, because the whole stock market is in an over-estimated state, to buy the stock with the highest underestimation simply can only guarantee the relatively smallest investment risk and can not assure investment profit. In this situation, the determination model of whole market price level must be established to analyze the evolving trend of whole market price level, and it will be the best to analyze the maximum drop and related probability of whole market price level in next period. So, under certain probability, find out and invest on the share whose underestimate degree exceeds maximum drop altitude of whole market price level. If such shares cannot be found, we should not invest. Theoretically, the performance of this portfolio will not only exceed that of market portfolio, but also guarantee, under certain probability, that the investment on this portfolio will not suffer loss.In Chapter 5, the author discusses specially the stock intrinsic value theory. In the theory of efficient market, to discuss specially the intrinsic value of stock is not necessary, because, under the hypothesis of the theory, stock price automatically reflects the intrinsic value of stock. But under the hypothesis of behavioral relatively efficient market, stock price can not reflect the intrinsic value of stock automatically. Therefore we should have a discussion on the intrinsic value of stock. In this Chapter, the author, on the base of existing research, cancels the hypothesis of investors with unlimited perceiving and brings the hypothesis of investors with limited perceiving as one substitution, then modifies the F-0 Model to make it closer to reality and more applicable. Further, the author utilizes the modified F-0 Model to measure the averageintrinsic value of listed companies in China stock market and the bubble degree of China stock market.In Chapter 6, discussion is made on price determination of respectivestock and the author puts forward a behavior PIV model. In an efficient stock market, price of respective stock, as we know, is determined by its intrinsic value, and its market price will in most degree reflect its intrinsic value automatically. But in a low-efficient stock market, intrinsic value is only one of the factors that determine the market price of respective stock. Market price is also influenced by psychological and behavioral preference factors of investors. Under the hypothesis of behavioral relatively efficient market, we can use behavior PIV model to price specific stock.In Chapter 7, the author specializes how the whole stock market price level is determined. If short sale is restrained in the market, specializing how the whole stock market price level is determined is necessary. The author, in this Chapter, analyzes the effects of stock market policies and economic performances on the whole stock market price level of China, presents some meaningful empirical rules about the evolvement of the whole China stock market price level and explains the evolvement of the whole China stock market performances.In Chapter 8, further study the efficiency of China stock market. The author studies respectively the efficiency of resource allocation function of stock market, the efficiency of the function of enhancing economic development, the efficiency of auxiliary function and the efficiency of reinforcing function. On the whole, the function efficiency of China stock market is low.In Chapter 9, study the reasons why China stock market is low-efficient. The author reduces the reasons to five institutional deficiencies, which respectively are deficiency of property right institution, deficiency of supervising institution, isolation of ownerships, deficiency of government' s intervention mechanism and deficiency of transaction institution. That these five institutional deficiencies interact with the laggard stock market culture make China stock market very hard to recover and slumped in a low-efficient state. The author considers that the reasons for the emergence of the institutional deficiencies in China stock market lie in the effect of start-point dependent rule, and the reasons for the long-term maintenance of the institutional deficiencies in stock market lie in the effect of route dependent rule, the blockage of vested interests and the laggard stock market culture. The author also analyzes the exigency and opportunities of institution innovation.
Keywords/Search Tags:Effective market, behavioral finance, intrinsic value, policy of the stock market, the institution of the stock market
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