Research On Behavior Of Noise Trade In China Stock Market

The critical problem in China's stock market is the behavior of the market subjects,in which the behavior of investors plays the most important role in the effective allocation of the market resources.In China's stock market,There are a lot of noise traders,who,short of the concept of long-term investments,pursuit short-term investments,mainly based on subjective beliefs or wrong information,which are nothing to do with fundamental value of the company.The study on noise trading has profound theoretical and practical significance for us to understand the functions of system and operational mechanism,and will help us to improve the market efficiency and protect investor rights.Noise trading can be divided into three categories according to the difference of the noise source and the formation mechanism.The first category relates to the quality of information and information processing mechanisms;the second relates to the principal-agent relation;the third relates to the manipulation.For the first category of noise formation mechanism,we have researched the relation betwwen noise trading and the volatility of the stock market.In order to comply with the actual stock market in China,we modified the passive investors' purchase preferences in the DSSW model,and added the short-selling restrictions and budget constraints.In the research we find out that with short-selling restrictions and budget constraints,the passive investors make the market lack of response to new information while the noise traders make the market over-reactive,and increase the volatility,which is in line with our empirical study on the volatility of Shanghai Composite Index and the Heng Sheng Index.We estimate that in China's stock market at least 60%of the volatility is caused by noise trading.For the second category of noise formation mechanism,we first construct a model of supply and demand changes of shares of listed companies,and analyze how the changes in equity of listed companies and non-tradable share unlocking affect stock prices.Empirical study found that in the upturn period of the stock market, non-tradable share unlocking is not significantly affected for the stock prices;while in the down period,the non-tradable share unlocking leads to accelerate the decline of stock prices.It's generally agreed that the non-tradable share unlocking is the chief culprit of the stock market sharp decline during the end of 2007 and 2008,but our study find that investors particularly noise traders is the major reasons,who in June 2005 to October 2007,as stock prices rising,had the high expectations.In addition to the deterioration of the economic situation at home and abroad,further exacerbating the noise traders' expectation,all these result in the stock market drop.Non-tradable share unlocking is merely a scapegoat.Applying the basic theory of corporate finance,we build a model to study the noise caused by the price-driven transactions refinancing behavior,hoping to adopt the model to analyze the impact of holistic listing for short-term and long-term shareholders and the reasons of the enthusiasm for holistic listing.The study found that as a result of the different visions of self-interest between the controlling shareholder who pursuit long-term interests and other shareholders who pursuit short-term interests,in the stock market downturn,the controlling shareholders tend to directional add-issuance in the holistic listing;and in the stock market rising,the other shareholders to accept the shares exchange.Based on this study,we believe that listed companies should be encouraged to injected high quality assets into the holistic listing by additional directional manner or the convertible way.For the third category of noise formation mechanism,by applying the evolutionary game theory,we construct a double-double evolutionary game model of strategy to analyze the game of herding behavior and manipulation in different market conditions.The study found monitoring is an important means to control manipulation in serious asymmetry information.Reducing the herding behavior can enhance the effectiveness of the stock market,and ultimately put an end to the market manipulation.In addition,we construct an asset pricing model,based on Keynes's beauty contest theory to analyze the relationship between excessive speculation and noise trading,and give a reasonable explanation to the speculation and irrational behavior in China's warrant market.From the perspectives of theoretical analysis and empirical study,by constructing a noise trading model in line with China's stock market,we analyzes noise trading and the market volatility,changes in equity of listed companies and market manipulation,etc.The main innovations in this article include:(1) construction of a short selling constraint in line with China's stock market pricing model by amendments and expansion to the DSSW model,analysis on intraday volatility in Chinese stock market behavior and empirical study;measure the degree of noise trading of market transactions.(2) from the perspective of equity changes, construction the pricing model of noise trading to give the issue of non-tradable share unlocking theoretical and empirical analysis,which is different from the current academic and practical general awareness.The conclusion that non-tradable share unlocking not the main reason for the 2008 market sharp fall.(3) the application of acts of corporate finance theory,analysis on the holistic listing,the study found that as long as the high-quality assets injected,the interests of both controlling shareholder who pursuit long-term interests and other shareholders who pursuit short-term interests do not contradict.(4) the introduction of the theory of beauty contest by Keynesian,analysis on excessive speculation and irrational behavior in China's warrants market;a reasonable explanation for the reasons for the excessive speculation and the impact on the price by the creation of warrant(5) the application of evolutionary game theory,research on China's stock market manipulation and herding behavior;the dynamic evolution of process of the choice of game strategy to provides the market a new regulatory approach and perspective.