The Announcement Effect And Reaction-Bias Of The Volume Change Of China's A Shares

Traditional financial theory inherits the evolutionary ideas of"natural selection" held by neoclassical economics, and applies the leastanalytical tools with following assumptions: firstly, investors are rational,they are able to evaluate asset prices rightly; secondly, if individual investors are not fully rational, it will not affect prices because randomly-occurring transactions will be counteracted reciprocally; and thirdly, even if the irrational investor behaviors are not stochastic, but correlated their effect on prices will be eliminated by rational arbitragers in markets, and markets will be efficient eventually. Since 1980, EMH confronts with double challenge from academe and reality. Ideal model seems to have problems in more and more reality test. Traditional financial theory based on EMH and Rationality assumption can not give explanations for the increasing anomalies in financial markets. Long existence of financial anomalies testifies the bounded rationality of investors as well as the limitedness of arbitrage. Ever since 1990, by the method of experiment, BF cast doubt on EMH from the angle of irrationality of individual's decision-making. The basic conclusion is that the market price of securities is not only determined by some internal factors contained by securities themselves, but also affected by each participant behavior.Since BF theory developed till now, one of the more mature arguments, which attracts the most attention, is that the market reaction bias. That is so-called Under-reaction and Overreaction. Bias relative to the normal reaction, the normal reaction is for people to expect things to change based on the arrival of the information, with the principle of change based on Bayesian rationality. The reaction speed and accuracy of stock price to the new information is the key to measure the market efficiency. If the price reacts quickly and precisely to the information, simple to say, this market is effective, otherwise this is usually an inefficient market with price reaction bias.Substantial researches were carried on the announcement effect led by equity structure changes (Seasoned Equity Offering, Stock Dividends) respectively from theoretical and empirical aspects, and gave explanation to the phenomenon in the framework of traditional finance theory, yet without complete answer. At present, caused by equity structure changes due to Seasoned Equity Offering, Stock Dividends ,announcement effect and reaction-bias research is not very large in China. Domestic research mainly focuses on whether announcement effect exists, and why positive or negative effects are produced. This paper in the behavioral finance paradigm mainly studies the announcement effect and reaction-biases caused by equity change, further introduces the concept of reaction-bias degree, makes use of the extended DSSW model, introduces the theoretical calculation formula of reaction bias degree, presents a method of CAR calculating reaction-bias degree, analysts evolution of the reaction-biases degree.We take the company which Seasoned Equity Offering, Stock Dividends between 1998 and 2004 as sample to investigate stock price change before and after announcement day. Seasoned Equity Offering has obvious negative announcement effect, and Stock Dividends has positive one, besides, the announcement of two matters has obvious overreaction. Through calculating reaction bias degree by the method of CAR, we find that reaction bias exists, the degree of which trends downward, and reaction bias degree is a kind of system bias.